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Expect Home Loan Rates to Rise as Private Banks Raise MCLR After Deposit Rate Hike

Santra Creations Pvt Ltd.Latest News & EventsExpect Home Loan Rates to Rise as Private Banks Raise MCLR After Deposit Rate Hike

Jan

23

January 23 , 2018 | Posted by admin | No Comments

Expect Home Loan Rates to Rise as Private Banks Raise MCLR After Deposit Rate Hike

MUMBAI Borrowers should prepare more for their home and car loans in the months ahead as bank rates have changed course and are now on the way up. Private sector banks led by Axis Bank, Kotak Mahindra Bank, IndusInd Bank and Yes Bank have all hiked their benchmark marginal cost of funds based lending rate MCLR by 5 to 10 basis points effective from January.

Bank said this secular hike in rates, the first time since they moved to the new MCLR system in April 2016, is due to the higher price they are paying for deposits in the last month or so and rates are likely to remain elevated in the short term. “Certificate of deposit rates have increased by 50 bps across all tenors. This hike reflects the current situation. RBI has indicated that rates may not fall further and it looks that bank lending rates are also unlikely to go down from here for now,” Dipak Gupta, joint managing director, Kotak Mahindra Bank which has hiked rates by 5 to 10 basis points across tenures.

Banks have seven different tenors under MCLR ranging from overnight, one month, three months, six months, one year, two years and three years. Rates for all loans linked to MCLR will go up after this revision. RBI’s monetary policy committee voted 5-1 on December 6 to keep the policy rate on hold at 6% after inflation accelerated to a sevenmonth high. This accompanied by uncertainties over government borrowing has led to a spike in government bond yields with the tenyear benchmark bond touching an 18-month high of 7.38% earlier this month. Yes Bank and IndusInd Bank have announced an increase of MCRL rates by 10 bps across all tenors effective January. Both banks said it is an indication of where interest rates are headed in the short term.

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