As a BSE notification by HDFC, “HDFC raises its Retail Prime Lending Rate (RPLR) on home loans, on which its Adjustable Rate Home Loans (ARHL) is benchmarked, by 50 basis points with effect from October 1, 2022.”
With the increase in the home loan interest rate, the EMI deducted from your bank account every month also increases.
However, the question is, how much will the EMI of HDFC loan borrowers increase after the latest hike in home loan interest rate by 50 bps?
Let us take an example of how much the EMI will increase. Suppose Mr. A has taken a home loan of Rs. 50 lakhs. The new interest rate that will be effective on the home loan is 8.40% p.a. Earlier the interest rate was 7.90%. The loan tenure is 25 years.
The interest rate is applicable to other borrowers (other than women) for home loan amounts between Rs 30 lakh and Rs 75 lakh.
What do RBI rules say about fixing the interest rate on home loans?
With effect from October 1, 2019, RBI has asked banks to link home loan interest rates to external benchmarking interest rate. The external benchmark can be any of the following:
- RBI repo rate
- Government of India 3 Month or 6 Month Treasury Bill Yield published by Financial Benchmark India Pvt. Ltd. (FBIL)
- Any other benchmark market interest rate published by FBIL.
The interest rate will be reviewed and reset at least every three months under external benchmark lending guidelines. Banks are free to charge margin at the external benchmark lending rate.
Why did RBI increase the repo rate?
RBI has increased the repo rate for 4 consecutive times since May 2022. The central bank has hiked the repo rate by 1.90% so far during the financial year. The hike in the repo rate is mainly due to inflation being above 6%. This is above the tolerance band that the government has set for the RBI.