Canara Bank increases home loan interest rates

Canara Bank has hiked its repo rate linked lending rate to 8.30% from 7.80% earlier, a hike of 50 basis points. The new lending rate will come into effect on August 7, 2022. The revision has come a day after the Reserve Bank of India (RBI) hiked the key policy rates by 50 basis points (100 basis points = 1%).

The effective interest rate on home loans for women applying for a home loan will be 8.05% and for other borrowers, the effective interest rate will be 8.10%, according to the Canara Bank website. For high-risk borrowers, a credit risk premium in the range of 0.05% and 2% is added to the repo rate linked lending rate to arrive at an effective interest rate on home loans.
Canara Bank, on its website, has stated that a concession of 25 basis points is being offered to low-risk borrowers till September 30, 2022. As per the bank’s website, “The concession will be applicable to only Low-Risk Borrowers where new housing loans (all variants) sanctioned and disbursed during the period i.e., from 01.07.2022 to 30.09.2022.” For women borrowers, a concession is available for 5 basis points.

The effective interest rate on home loans for high-risk borrowers will be between 8.35 and 10.30, from tomorrow.

Why did RBI hike key policy rates?
The RBI has hiked the repo rate thrice since the start of FY 2022-23. This includes a one-off scheduled announcement made in May 2022. The central bank hiked the repo rate by 40 basis points in May. Then again in its June and August monetary policy reviews, the RBI hiked the repo rate by 50 basis points each time. The central bank has been on a rate hiking spree due to rising inflation. Retail inflation has remained stubbornly high at over 6 per cent for more than the past six months.