Mumbai: Home loan giant ICICI bank has taken the cue from the Reserve Bank of India (RBI) and increased its lending rates by half a percentage point across all products - corporate loans and retail loans, which include home loans.
With this hike, home loans alone have gone up 2 percentage points from 7.5 per cent in June 2005, to 9.5 per cent in 2006.
ICICI bank says the rate hike was unavoidable. "We see this as a signal from the RBI that rates are headed north," explains Dy Managing Director, ICICI, Chanda Kochhar.
So how much does one's Equated Monthly Installment (EMI) go up? For a loan of Rs 20 lakh, with tenure of 15 years, the EMI goes up by Rs 1200 per month.
Other big players like HDFC and SBI say they are not in a hurry to raise home loan rates as of now.
They say the money supply situation in the market is comfortable and they will up their rates only when their own borrowing cost goes up.
So does costlier home loans mean a slowdown? ICICI and HDFC say this will not lead to home loan growth slowing down.
Other bankers say that it's not rate hikes, but unaffordable property prices that are hurting growth.
For now, ICICI bank has only raised lending rates but has not hiked deposit rates.
Most banks say that they have recently raised their prime lending and deposit rates so they will wait before reacting to RBI's rate hike.
However, it's only a matter of time. Borrowers will soon have to brace themselves for another round of rate hikes.
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