The Hindu Business Line : HDFC rate hike sets others thinking

It is now clear that interest rates have not only bottomed out, but have started rising, as evidenced by HDFC's decision to hike rates on its fixed-rate home loans by 25 basis points on Tuesday.

Consequent to this, banks and financial institutions have gone into a huddle to review their interest rate structures on home loans.

Sources close to the country's biggest bank, State Bank of India, confided that the bank was `closely monitoring' developments while at the same time examining its existing rates on housing loans.

Other banks will also be evaluating their stance in their forthcoming asset liability committee meetings sometime next week. However, some industry players feel that there might not be any further hike in interest rates in the near future.

According to Mr Kapil Wadhawan, Managing Director, Deewan Housing Finance Ltd, " Interest rates have started inching up as is reflected in the 10-year G-Sec, whose yield has crossed 6 per cent. But we still remain bullish on housing."

" We will take a measured call and there is no immediate need for us to hike rates. Most banks or institutions will take this call depending on their cost of funds".

Apprehensions of a global hardening in interest rates spurring a tightening in domestic rates have been looming large as the 10-year G-Sec climbed up to 6.28 levels in a matter of just a couple of days recently, despite a good liquidity overhang in the system.

"A rise in home-loan rates is inevitable and all institutions will be required to do it. As far as LIC Housing Finance is concerned, as long we can afford to maintain our spreads, we won't pass on the burden to the customers. When we feel it is no longer sustainable, we will also have to raise the rates," said Mr Ashok Dasgupta, Managing Director, LIC Housing Finance Ltd.

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