Owning your dream house has just got dearer and one can blame it on increasing oil prices and inflation. The latest bout of home loan rate hikes should leave no doubt in the minds of home loan-seekers that interest rates are well and truly bound on a northward journey. If interest rates rise even further, it is unlikely that home loan rates will remain unscathed. The leading players in the banking industry such as have increased the PLR— the SBI and HDFC Bank by 0.50%,and ICICI Bank by 0.75%. Similarly, the Bank of India has increased its PLR rates by 50 basis points to 13.25% from the existing 12.75%; this will increase the EMI on all types of loans.
Another reason why home loan rates have hardened is that the Reserve Bank of India (RBI) has called for stricter provisioning norms on home loans. This means that home loan companies will now have to provide for a larger sum of money against their home loan assets. It is not surprising that they have passed on a portion of this burden to the consumer by hiking home loan rates.
The fresh borrowers who want to borrow and existing customers who have already borrowed under floating rate option will now have to shell out more. This is applicable not only to home loans, but to all kinds of consumer loans, including auto financing.Public sector banks like SBI, UBI and PNB already increased the rate by half to 1% point last week. For those who have bought houses on borrowed funds, it's a double whammy. On the one hand, high inflation, at 11.63% and set to increase further, is adding to their monthly bills. On the other, the rise in interest rate will push their EMIs substantially upward. Table1 shows the impact on EMI on Rs. 1 lakh loan.
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