HDFC cuts RPLR by 5 bps, home loans now at 6.75%

The spree of mortgage rate cuts continues with Housing Development Finance Corporation (HDFC) on Wednesday reducing its retail prime lending rate (RPLR) by five basis points (bps) to 6.75%, irrespective of the loan amount. The move follows similar rate cuts on home loans by State Bank of India (SBI) to 6.7% and Kotak Mahindra Bank to 6.65%.

HDFC said its adjustable rate home loans (ARHL) are benchmarked to the RPLR and the revised rates will come into effect from March 4. “The change will benefit all existing HDFC retail home loan customers,” the mortgage lender said in a statement. Prior to the rate reduction, HDFC was charging between 6.8 and 7.3% for home loans.

In the absence of loan demand in other segments, banks have taken to lowering their home loan rates. On Monday, SBI lowered home loan rates by 10 bps to 6.7%, a concession that would be available till March 31, subject to the loan amount and Cibil score of the borrower. KMB cut its home loan rate to 6.65%, taking it below that of market leader SBI. ICICI Bank home loans start at 6.8%, while the home loan rates for both Axis Bank and LIC Housing Finance begin at 6.9%.

Even as housing loan growth shrank to 7.7% year-on-year (y-o-y) as on January 29 from 17.5% a year ago, it remains one of the faster-growing credit segments and exceeds the rate of overall non-food credit growth in the banking system.

In a report on Wednesday, Care Ratings said during the last few months, housing loan growth was healthy amid a retail credit push, concessions on home loan interest rates and low stamp duties till December 2020 in Maharashtra. “In January 2021, the housing loan growth moderated to 7.7% partly due to the end of festive season offers and increase in stamp duty from January 1, 2021 in Maharashtra,” the report said, adding that housing loans continue to remain the single-largest segment with a 52% share of lending in banks’ outstanding retail portfolios.

In the meantime, housing finance companies (HFCs) and other non-bank lenders in the segment have been losing market share to banks as their lending rates have not dropped as steadily as that of their banking peers.