HDFC raises home loan rates by 50 bps

Keki Mistry, Vice-Chairman and Joint Managing Director, HDFC, said rates will go up by 50 bps for existing borrowers. "For new borrowers, rates will actually go up by 75 bps. The best rate will now be 11% for a floating rate loan."

Excerpts from CNBC-TV18's exclusive interview with Keki Mistry:

Q: Does this affect everyone ‑ existing as well as new borrowers ‑ to the same extent of 50 bps?

A: For existing borrowers, rates will go up by 50 bps. For new borrowers, rates will actually go up by 75 bps. The best rate will now be 11% for a floating rate loan.

We had dropped rates by 0.25% a few months ago. So, January to now the increase is 0.25% and not 0.5%.

Q: What is the average or largest category of loans that you have? Is it 10 lakh or 15 lakh? For any such average category, what may be the rise in EMIs?

A: Forget what the largest is. The average size for loans taken for example in 2008 is Rs 14 lakh. This year, it might be marginally higher than that. It will be in the Rs 14-15 lakh range. The effective cost that the customer ends up paying does not go up to as much as  interest rates go up, because the additional interest he pays qualifies for tax benefit.

Q: You don't fear that there could be a rise in bad loans or defaulters because of the continuous rise in EMIs for the last two years or so?

A: EMIs have not continuously risen. Three-four months ago, we had dropped rates by 0.25%.

Q: But there were loans that were given out at 7.5-8%. For those people, what may be the strain? Are you expecting any strain on your defaulter list?

A: The 7.5-8% was actually four-and-a-half to five years ago for a short period of time. Incomes have risen significantly during that period.

Q: Do you expect any impact on volumes going forward?

A: In the 1990s we had interest rates that used to be 16-17%. We still grew at that time. I really don't think there is going to be a significant or material impact on volumes.