ICICI, HDFC, Kotak, Axis Bank Hike Loan Rate: Increase rates on Home & Car Loans

There comes the big news which everyone was afraid of - The largest players in the home loan and car loan markets have gone for a Home Loan Rate Hike and Car Loan Rate Hike. This comes as another big hit for the retail customers who are looking for a respite from the rising inflation costs, high cost of living in metro and other issues. The budget has already put a load on the consumers in terms for fuel price hike, then there is a proposal to charge 10.3% service tax if someone is booking a uner constructed flat or apartment. Now, the rate hike by the leading banks, who are big players in the home loan and car loan markets have added more problems for the end customers.

Axis bank was the first one in the list, which stopped its attractive discount home loan offer of 8.25% fixed for 2 years, even before the budget. Now, ICICI Bank and HDFC Bank have also joined the babndwagon by increasing the home loan rates and car loan rates.
The reason being quoted is the stand by RBI - it increased the cash reserve ratio by 75 basis points which led to this change. This also had the effect on bond market, the 10 year benchmark bond has risen around 12 bp since budget was announced.

By what rates have auto loans or car loans increased?
The auto loans or car loans have been increased between 0.5% to 1% and it varies from Bank to Bank.

By what rates have House loans or Home loans increased?
The home loans have gone by by 50 basis points.

The banks are quoting the reason that they have offered high rates on the deposits schemes by as much as 75 basis points and they are trying to justify it by saying that loan rates should get correlated with the high deposit rates.

Which Banks have increased the loan rates?
Multiple Banks - ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Axis Bank,

ANy other banks which are still offering cheaper home loan rates?
Yes - the budget was good for the nationalized banks - so again Banks like SBI, PNB, Bank of Maharashtra are offering the discounted rates. However, the problem is that these banks take atleast 45 days to process the applications, leaving less choice for the customers as bookings of the flat should be made in a hurry, and that is where the customer is forced to approach the private banks.
Union bank & Cancara Bank have wqithdrawn their discounted home loan schemes.

ICICI Bank Rate Cut: Cuts Home loan, retail loan and other loans rate by 0.50%

There comes the big news from ICICI Bank, the second largest bank of India and the largest private bank of India. It has decided to cut both the corporate as well as retail loan rate by a whooping 50 bps or 0.5%. This can come as a big booster package for the ailing housing and mortgage sector, because ICICI Bank is one of the front runners in the loan market, especially the House Loans or Home Loans.


What will be the effect on the EMI after ICICI Bank Rate Cut?
Since December, this is the 3rd rate cut by ICICI bank and the overall rate cut since then has now come to a total of 1.5% or 50 basis points. A rate cut obviously means that there will be less of EMI payment. So for an example, if you have taken a loan of say 50 Lakh Rs. for a period of 20 years, your monthly EMI amount would reduce by around 5150 Rs.

Is the ICICI Bank Rate Cut for new customers only or is it for old customers as well?
The ICICI Bank Rate Cut is applicable both for the new as well as old customers who have taken a floating rate loan from ICICI Bank. So both types of customers will benefit.

Who is going to benefit more from ICICI Bank Rate Cut?
If you consider the rate cuts which started in December 2008, it seems that the new customers will benefit more. The reason: the cumulative rate cut for new customers since December has been a total of 2.25%. However, for old customers it has been 1.5% only. So new customers can now look forward to taking a loan and benefit more.

Is there any other bank which offers lower rate of interest even after ICICI Bank Rate Cut?
SBI or State Bank of India is presently offering the home loan at 8%, which is lower than the ICICI Bank home loan rate even after the Rate Cut. however, this SBI loan rate is only for the first year - it may increase in the coming years. Though the rumors going around are that SBI will not sit silent. It is also expected to reduce the home loan rate by arouond 25 basis points before this month end. Then there are other banks also from whom some similar action can be expected.

As per TOI, Normally, it has been seen that SBI’s normal rate at which it offers loan to the customers is 25 to 50 basis points higher than the rates offered by HDFC and ICICI Bank. At present also, while ICICI Bank nad HDFC offers home loan of Rs 30 lakh at 9.25%, SBI charges 10.25%. Therefore, in the long term, the benefit of getting home loan at 8% could be off-setted. However, in future, in SBI also lowers the rate to the range of ICICI bank and HDFC Ltd, SBI’s offer of 8% is the best one. The present rate cut by ICICI Bank will help revive the real estate markets