Mortgage financier LIC Housing Finance Ltd on Monday raised its prime lending Rate by 60 basis points (bps) and will now charge a minimum of 7.50% interest rate on home loans. The non-banking finance company (NBFC) in May increased its lending rate by 20 bps to 6.9%. The two consecutive hikes in the lending rate in two months comes on the back of the Reserve Bank of India increasing policy rates by 40 bps and 50 bps in the corresponding months.
Despite the hike, the NBFC expects the rates to be competitive. “The interest rate hike is in line with the market scenario. If compared historically the rates are still at a very competitive level. Therefore, we will see a sustenance in demand for home loans,” Y Viswanatha Gowd, MD & CEO of LIC Housing Finance said in a statement. Housing finance companies charge retail prime lending rate to borrowers with higher CIBIL scores.
HDFC raised retail lending rate on housing loans by 50 bps while ICICI Bank increased its externally benchmarked lending rate to 8.60% days after the RBI increasing the policy repo rate in June. Similarly, state-owned banks State Bank of India (SBI) raised home loan external benchmark lending rate by 40 bps to 7.05% while Bank of Baroda and Punjab National Bank (PNB) increased its repo linked lending rate (RLLR) to 7.40%.
Since the policy rate hike by the RBI, all banks have raised their marginal cost of funds-based lending rates (MCLR). Kotak Mahindra Bank, ICICI Bank and HDFC Bank raised their MCLR for June by 30 to 35 bps. SBI, Bank of Baroda and Union Bank of India have also increased their MCLR.