PNB, Canara Bank hike home loan interest rates; check details here

With the Reserve Bank of India (RBI) hiking its repo rate by 35 basis points (100 bps/basis points = 1 per cent) on December 7, 2022, several banks increased their home loan interest rates in last two days. Now Punjab National Bank and Canara Bank are the latest banks to increase their home loan interest rates linked to the repo rate.

Punjab National Bank
Following the central bank, this public sector bank has hiked the repo-linked home loan interest rate by 35 bps. According to the bank’s website, “The RLLR has been changed from 8.40 per cent to 8.75 per cent {Repo Rate (6.25 per cent) + Mark-up (2.50 per cent)} w.e.f. 08-12-2022 for all customers. Along with RLLR, BSP of 25 bps will be charged.” The RLLR stands for repo-linked loan interest rate.


Hence, the effective interest rate charged on an existing home loan with the bank will be 9 per cent per annum. Before the RBI December policy rate hike, the home loan interest rate of the Punjab National Bank stood at 8.65 per cent.

Also Read: 10% salary hike not enough to cover impact of RBI repo rate hike

Canara Bank
Canara Bank on its website announced that the RLLR of the bank stands at 8.80 per cent with effect from December 7, 2022. Post this hike, the effective interest rate charged by the bank stands in the range of 8.55 per cent per annum to 10.80 per cent per annum.

Do note that the bank is offering a concession of 25 bps to low-risk borrowers till December 31, 2022. The effective interest rate for low-risk women borrowers stands at 8.55 per cent per annum and for other borrowers stands at 8.60 per cent per annum.

Impact of RBI rate hike on home loan borrowers
The central bank has been hiking key policy rates since May 2022. On a cumulative basis, the bank has hiked the repo rate and other key policy rates by 2.25 per cent. The latest repo rate stands at 6.25 per cent.

Both the existing home loan borrower and the new home loan borrowers who are planning to take home loans soon will be impacted by the RBI’s decision to hike key policy rates. However, do note that for existing home loan borrowers, the impact will depend on the outstanding home loan amount.

If an existing home loan borrower has taken a home loan recently, say in the last one or two years, then they will face a greater impact of the hike in interest rate. This is because the outstanding loan amount is higher in the initial years of the home loan. The EMI paid by them in the initial years has a higher share of interest paid than the outstanding loan amount.

However, those home loan borrowers who have had home loans going for more than 5 years or so, will have less impact as their EMIs will have a higher share of outstanding loan amount than the interest paid amount.

"Existing home loan borrowers should opt for the EMI increase option, with the consent of their lenders, as and when their interest rates are increased. Opting for the EMI increase option would result in lower interest costs than the tenure increase option. Financially constrained home loan borrowers can opt for the tenure increase option if they want their EMIs to remain the same," said Naveen Kukreja - CEO& Co-founder, Paisabazaar.