RBI Raises The Repo Rate Once More, Raising The Cost Of Home Loans

ForFinancialYear(FY)2022–2023,theReserveBankofIndia(RBI)madeitsfinal changetothereporate.Thereporatehasincreasedby25basispoints(bps),andit iscurrently6.5percent.Similarstatementsbythecentralbankwerefollowedbythe mostrecentincreaseof35bpsinDecember2022.examinesthepotentialeffectsof thenewreporateonhomebuyersandtheborrowingratesofferedbyvariousbanks. TheReserveBankofIndia(RBI)announcedthelastincreaseinthereporateforthe currentfiscalyear(FY)2022–2023duringitsMonetaryPolicyCommittee(MPC) meetingonFebruary8,2023.Thereporatewasincreasedby25basispoints(bps) to6.50percent,andtheMSFratehasincreasedto6.75percentbythetopbank.

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TheReserveBankofIndia(RBI),thecountry'scentralbank,hasannouncedsix increasestothereporate,therateatwhichitlendsmoneytobanksandother financialinstitutionsalloverthenation,duringthefiscalyear2022–2023sofar. Thereporateiscurrently6.5percent.Afterkeepingthereporateaccommodating duringthepandemicat4%,thefirstreporatechangewasannouncedinMay2022 withanincreaseof40bps.TheRBIhassinceannouncedfiveadditionalincreasesto thereporate.Threetimesa50-bpshikewasintroduced,witha35-bpsboostbeing themostrecent,inDecember2022.

AftertheMPCmeetingsscheduledforMay4,June8,August5,September30,and December7of2022,theseincreaseswentintoeffect.Itisanticipatedthatthelast increaseinlendingratesforthefiscalyearendingonMarch31,2023,willraisethe interestrateschargedbybanksonhomeloans,affectingtheaverageperson'sability topurchaseahome.

Increases that banks announced in March 2023

HDFChasraiseditsRepoLinkedLendingRate(RLLR)byanadditional25basis pointsasofMarch1,2023.Also,acrossalltenors,PunjabNationalBank(PNB)has raisedtheMCLRby10bps.ThebaserateoftheStateBankofIndia(SBI)has increasedfrom9.4percentto10.1percentby70basispoints.TheBenchmark PrimeLendingRate(BPLR)hasalsobeenchangedbythebankfrom14.15percent to14.85percent.SBIhasimplementedbothadjustmentsstartingonMarch15, 2023.

Banks' updated MCLR rates

Accordingtothetenors,whichrangefromovernighttothreeyears,theMarginal CostofFundsBasedLendingRate(MCLR)varies.TheMCLRchangewillapplytoall borrowersofloans,bothcurrentandnew.

Bank Tenor Old rate New rate StateBankofIndia Overnight 7.85% 7.90% Onemonth 8% 8.10% Threemonths 8% 8.10% Sixmonths 8.30% 8.40% Oneyear 8.40% 8.50% Twoyears 8.50% 8.60% Threeyears 8.60% 8.70% KotakMahindra Overnight 7.80% 8.15% Onemonth 8.05% 8.40% Threemonths 8.20% 8.55% Sixmonths 8.40% 8.75% Oneyear 8.55% 8.95% Twoyears 8.85% 9% Threeyears 9.05% 9.15% PunjabNational Bank Overnight 7.90% 8% Onemonth 8% 8.10%

Bank price increases announced in January & February 2023

WitheffectfromJanuary3,2023,theIndianBankreviseditsMCLRby20–25bps acrosstenors.PNBraiseditsRLLRby25bpsinresponsetotheRBI'sannouncement ofareporatemodification.WitheffectfromFebruary9,2023,theRLLRwas increasedfrom8.75to9percent.Moreover,BankofBaroda(BOB)increasedits MCLRbyfivebasispointsforalltenorsstartingonFebruary12,2023.Witheffect fromFebruary12,2023,CanaraBankunexpectedlyreduceditsRLLRby15basis points.ThenewRLLRforthebankis9.25percent.SBIalsoimmediatelyboostedthe MCLRby10basispointsineachofitstenors.

Threemonths 8.10% 8.20% Sixmonths 8.30% 8.40% Oneyear 8.40% 8.50% Threeyears 8.70% 8.80% HDFC Overnight 8.20% 8.30% Onemonth 8.25% 8.30% Threemonths 8.25% 8.35% Sixmonths 8.35% 8.45% Oneyear 8.10% 8.60% Twoyears 8.60% 8.70% Threeyears 8.70% 8.80% Axis Overnight 8.55% 8.60% Onemonth 8.55% 8.60% Threemonths 8.60% 8.70% Sixmonths 8.70% 8.75% Oneyear 8.75% 8.80% Twoyears 8.85% 8.90% Threeyears 8.90% 8.95% BankofBaroda Overnight 7.85% 7.90% Onemonth 8.15% 8.20% Threemonths 8.25% 8.30% Sixmonths 8.35% 8.40% Oneyear 8.50% 8.55%

Increases declared by banks in December 2022

PNB,BankofIndia,andICICIBankraisedtheirMCLRbyfivebasispoints,25basis points,&10basispoints,respectively,startingonDecember1,2022,inanticipation ofanincreaseinthereporate.Theone-yeartenorwasincreasedbytheBankof Indiafrom7.95percentto8.15percentby20basispoints.OnDecember7,2022,it increasedtheRepoBasedLendingRate(RBLR)to9.10percent.FromDecember7, 2022,HDFCBankalsointroducedMCLRchangesforalltenors.HDFCBankraisedits RetailPrimeLendingRate(RPLR)by35basispointsto8.65percentasofDecember 20,2022.Homeloansfromthebankwereofferedtoapplicantswithcreditscoresof 800orhigheratthisrate.ThePrimeLendingRate(PLR)ofLICHomeFinance increasedby0.35percent,bringingtheinstitution'sminimumhomeloaninterest ratedownto8.65percent.

Increases declared by banks in November 2022

AsofNovember1,2022,PNB,BankofIndia,&ICICIBankeachuppedtheir respectiveMCLRbyasmuchas30basispoints,15basispoints,&20basispoints. ForPNB,theMCLRforalltenorswasbetween7.40and8.35percent.Theone-year MCLRforBankofIndiaincreasedfrom7.80percentto7.95percent,whiletherest ofthetenorssawanincreaseof10basispoints.TheMCLRoftheICICIBankwas revisedtoarangeof8.05-8.30percent.OnNovember3,2022,IndianBank increaseditsloanratesby15to35basispoints.

Also,startingonNovember5,2022,theDCBBankincreaseditsMCLRby27basis pointsforalltenors.Thenewlendingratesrangedfrom9.58to10.23percent. CanaraBankincreaseditsloanratesby15-20basispointsbeginningNovember7, 2022.Also,itupdatedRRLLRto8.80percent.WitheffectfromNovember10,2022, theBankofMaharashtrahasincreaseditsone-yearMCLRto7.90percentandits one-monthtenorbyfivebasispointsto7.50percent.Witheffectstartingon November15,2022,SBIhasraiseditsloanratesbyupto15basispointsforall tenors.

Updates on October 2022 home loan interest rates

ThePrimeLendingRate(PLR)atLICHomeFinanceincreasedby0.50percent.With effectfromSeptember30,2022,theICICIBankalsoincreaseditsExternal BenchmarkLendingRate(EBLR)by50basispoints.FromSeptember30,2022, BankofIndiareviseditsRBLRto8.75percent.Also,thebankincreasedtheMCLRin severaltenorsby10to20basispoints.BothHDFCLimitedandSBIincreasedtheir lendingratesby50basispointsasofOctober1,2022.SBIlowereditsEBLRand RLLRwhileHDFCuppeditsRPLLR.PNBboosteditsRLLRfrom7.7percentto8.4 percentby50basispoints.

WitheffectfromOctober1,2022,thebankhasraiseditsMCLRbyfivebasispoints foralltenors.BeginningonOctober1,2022,BOBincreaseditsRLLR.AxisBank raisedtheirMCLRby25basispointsforalltenorsstartingonOctober18,2022.

Repos and home loan interest rate updates for September 2022

OnSeptember1,2022,PNBincreaseditsMCLRby0.05percentacrossalltenors. Alsoraisingtherateby10basispoints,effectiveSeptember1,2022andSeptember 3,2022,respectively,wereICICIBankandIndianBank.TheMCLRforICICIBank wasbetween7.75percent&eightpercent,whiletheMCLRforIndianBankranged from6.95to7.75percent.TheMCLRofCanaraBankwasalsoraisedbyupto0.15 percent.AlsoraisingtheirMCLRratesbyupto0.10percentwereIndianOverseas BankandBOB.WhileIndianOverseasBank'snewrateswentintoeffecton September10,2022,BOB'sratestookeffectonSeptember12,2022.

TheRBI'sreporateincreases,whichbeganwithanincreaseof40basispointsin May2022,arebelievedtobethecauseofthelendingrates'ongoinghigher revisions.TheRBIissuedtwoadditionalmodificationsthatincreasedthereporate by50basispointseachandwereannouncedinJune&Augustof2022,respectively.

Bank hikes announced in August 2022

WitheffectfromAugust15,2022,theSBIincreaseditsMCLRforthethirdtimeby 20basispointsacrossalltenors.Duetoareporateincreaseof90basispoints,the bankpreviouslyincreaseditslendingratesinJune2022.(bps).OnAugust5,2022, theCentralBankofIndia(RBI)raisedthelendingrateoncemore,thistimeby50 basispoints.Asaresult,differentbanks'lendingrateswereupdated.

WitheffectfromAugust5,2022,theICICIBankfurtherboosteditsEBLRto9.10 percentfollowingtheupgrade.TheRLLRwasincreasedbyPNBto7.90%beginning August8,2022.TheHousingDevelopment&FinanceCorporation(HDFC)Bankalso raiseditsRPLRby25basispointsbeginningonAugust9,2022.Furthermore,asof August12,2022,BOBbeganraisingtheMCLRbyupto0.20percentacrosstenors. InadditiontotheMCLRincrease,SBIalsoincreaseditsEBLRandRLLRby50basis points.Moreover,by0.50percent,BajajHomeFinanceandLICHousingFinance raisedtheirinterestratesonloans.WhenLICHomeFinanceofferedloanswith interestratesstartingat8%,BajajHousingFinanceannouncedinterestrates startingat7.70%.

Hikes declared by banks for April to June 2022

BOB,AxisBank,andKotakBankfollowedSBI'sleadandincreasedtheirMCLRby fivebasispointsoverthecourseofaweekbetweenApril12andApril18in anticipationofareporateincrease.FromMay1,2022,HDFCBankenhancedtheir RPLR.OnJune1,2022,therateswerefurtherincreasedbyfivebasispoints.The bank'sfloatinghomeloanrateswereimpactedbythehike.WitheffectfromMay4, 2022,ICICIBankalsoraiseditsExternalBenchmarkLendingRate(EBLR)to8.10 percent.Also,startingonJune1,2022,ICICIBank&PunjabNationalBank(PNB) increasedtheirMCLRsby30basispointsand15basispoints,respectively.The statementcameaftertheRBIraiseditsreporatefromfourpercentsinceMarch 2020to4.40percentonMay4,2022.

External Benchmark Lending Rate (EBLR): What is it?

Bankswillonlyestablishaninterestrateonloansthatisaslowastheexternal benchmarklendingrate(EBLR).Itisbasedonexternalbenchmarksliketherepo rate.Thebenchmarkissetforloanswithvariableinterestrates.

What is RLLR, or Repo Linked Lending Rate?

Therepolinkedlendingrate(RLLR),whichisdependentonthereporatesetbythe RBI,isalendingrate.ThechangeinreporatehasanimmediateeffectontheRLLR. IfaloanisbasedonRLLR,thefloatinginterestratewillchangeaccordingtochanges inthereporate.

What does MCLR mean and how does it affect your house loan EMI?

FollowingtheMCLR'sintroductionin2016,themediahascoveredtheRBI'sinterest ratereductions.TheEquatedMonthlyInstalments(EMI)ofmanyloans,including personal,vehicle,andhouseloans,areaffectedbychangesintheMCLR.Theyare anticipatedtoincreaseinpriceduetoarevisionhigher.Also,banksareanticipated tofollowsuitbyraisingtheirlendingratesassoonastheRBIannouncesany increaseinthereporate.

Theminimalinterestratesabankmustchargeonaloanisknownasthe"MCLR,"or benchmarkinterestrate.Tomaintainuniformity&betterpricingforcustomers,the RBIsetthisin2016.

Would the rising interest rates deter people from buying homes?

Ariseinlendingrates,particularlyforhomebuyers,wouldcausemarketdisruption, claimrealestateexperts.Thecombinationofthisandbuilders'increaseduseof unitsinnewhousingsocietiesasaresultofrisingrawmaterialcostscouldfurther erodeconsumerconfidence.Thedesireforhomeownershipmayshort-term decline.Tobalancetheimpactoftheriseinhousefinancingandnewhome expenses,however,itwillmostlydependonStategovernments'decisionstoextend oroffersomeconcessionsonstampdutyandregistrationcharges.

TherealestateindustryanticipatesfavourablehomeloanrulesinlightoftheRBI's periodicannouncementofchangestothereporatesothathomebuyerscankeep makinginvestmentsandtherealestatemarketunaffected.

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