On an average, the monthly instalment on a 20-year, Rs 10-lakh loan has gone up by 50 per cent to Rs 12,070 (13.5% interest rate) from Rs 8,060 (7.5% interest rate) five years ago. Home loan rates in India had last peaked to about 18% in 1995.

HDFC has increased its Retail Prime Lending Rate (RPLR) — on which its Adjustable Rate Home Loans (ARHL) are benchmarked — by 0.50% with effect from July 1, 2008. For new home loan customers, the ARHL loans will now be priced at a minimum of 11% a year while the fixed rates will be 14% a year.

The increase in RPLR will affect existing borrowers whose loans come up for re-pricing on or after July 1, 2008. HDFC follows a three-month reset cycle for its floating rate loans and hence the change in RPLR will impact existing customers over the next three months.

HDFC has also increased its rates on deposits by 0.50% across most maturities. Prior to Monday’s increase, HDFC had slashed its RPLR by 0.25% in February 2008.

ICICI Bank has increased its Floating Reference Rate (FRR) by 0.75% for consumer loans (including home loans) with effect from June 30, 2008. The revised FRR will be 13.50% as against 12.75% now. For existing floating rate customers, the increase in Floating Reference Rate (FRR) by 0.75% will be effective from July 1, 2008. The existing fixed rate customers whose loans are fully disbursed will, however, not be impacted by the increase and their contracted rates will remain unchanged.

ICICI Bank has also hiked its Benchmark Advance Rate (I-BAR) for corporates by 0.75%. The revised I-BAR will be 16.50% a year payable monthly as against 15.75% a year now. It increased the interest rates on fixed deposits of value less than Rs 15 lakh by 0.50-1.00% with effect from July 1, 2008.

According to HDFC, the hike is in line with interest rates in the economy, which have hardened due to rising inflation and shrinking liquidity in the domestic market. “HDFC has so far been able to hold on to the rates inspite of the money markets experiencing substantial volatility. Keeping in mind the needs and concerns of our customers, we are affecting a moderate increase on all loan products,” it said.

Four state-run banks on Monday said they would raise their benchmark prime lending rates (BPLRs), or the reference rate for determining all loans and advances, from Tuesday. Save Vijaya Bank that will raise its PLR by 25 basis points to 13.25%, the increase is 50 basis points for the remaining banks. While Bank of India has increased its BPLR to 13.25% from 12.75 %, Allahabad Bank and Dena Bank raised their rates to 13.50%. The revised rates will be effective from July 1, 2008. The banks have increased their deposit rates too.