Home Loan, Car Loan EMIs to Go Up as Lender Hikes MCLR by 35 bps


HDFC Bank MCLR Rate Hike: India’s largest private sector lender HDFC Bank has increased its marginal cost of lending rate, or MCLR across all tenors, according to its website. The MCLR, a key point in deciding loan interests, has been hiked by as much as 35 basis points, said HDFC Bank. The HDFC Bank MCLR rate hike comes at a time when the Reserve Bank of India’s Monetary Policy Committee has started its scheduled deliberations and is expected to go with another rate hike amid rising inflation.

The HDFC Bank MCLR rate hike will mean that loan interests for new and existing borrowers are set to increase, including equated monthly installments (EMIs) for home loan, vehicle loan and any other loan related to marginal cost. The Bank had on May 7 also increased its MCLR rates by 25 basis points, days after the RBI had hiked its repo rates by 40 basis points. It must be noted here that 100 basis points equals 1 per cent. Therefore after the latest HDFC Bank MCLR hike, loan EMIs may increase by 35 per cent.

Here are the tenor-wise MCLR effective from May 7, 2022, as per the HDFC Bank website:

Over night: Old rate — 7.15 per cent; New rate —  7.50 per cent

One Month: Old rate — 7.20 per cent; New rate — 7.55 per cent

Three Month: Old rate — 7.25 per cent; New rate — 7.60 per cent

Six Month: Old rate — 7.35 per cent; New rate 7.70 per cent

One Year: Old rate — 7.50 per cent; New rate 7.85 per cent

Two Years: Old rate — 7.60 per cent; New rate 7.95 per cent

Three Years: Old rate — 7.70 per cent; New rate 8.05 per cent

Will Home Loan EMIs, Car Loan EMIs Increase after HDFC Bank MCLR Hike?

As a result of the HDFC Bank MCLR rate hike, housing, vehicles and personal loans are going to get more expensive as the EMIs will increase. However, existing home loan borrowers must note that the EMI will be revised only when the reset date of their loans arrive. The lender will increase or revise the interest rate on the borrowers’ home loans on the basis of prevailing MCLR when the reset date arrives. This means that if a person’s home loan is based on MCLR, and the reset date is in September, then he or she will have to pay the hiked EMIs from September. Till then, the borrower will pay on basis of their existing rates.

“The Marginal Cost of the Fund-Based Lending Rate or the MCLR is the minimum interest rate a financial institution needs to charge for a specific loan. It dictates the lower limit of the interest rate for a loan. This rate limit is set in stone for borrowers unless specified otherwise by the Reserve Bank of India,” said the HDFC Bank on its website. MCLR is dependent on the changes made to the RBI Repo rate.

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