Even as major private sector home loan lenders are passing on the impact of a rise in cost of funds to their borrowers, there are a few public sector banks which are contemplating against raising floating home loan rates for their existing customers. While a few of them are planning to freeze the floating rate for small and medium-ticket customers for the time being, others are planning to launch separate schemes altogether to shield their existing customers. For instance, Allahabad Bank has announced a “freeze” in its home loan rates at the current level for the time being for borrowers up to Rs 10 lakh. AllBank has, on Monday, raised its benchmark prime lending rate (BPLR) by 75 basis points (bps) to 13.5% from the current 12.5%. The change in BPLR will, however, not be applicable to home loan borrowers up to Rs 10 lakh, the bank said. Bank of India (BoI), on the other hand, intends to link its floating home loan rates directly to its prime lending rate (PLR), whereas it maintains a floating reference rate (FRR) for existing home loan borrowers. It intends to keep its FRR unchanged at the current level or there would be a marginal increase, according to a senior BoI official. all public sector banks could play the same tune.

For instance, Uco Bank was considering to protect its existing home loan customers. However, after a detailed study on its cost of funds. There will be a matching impact on home loan borrowers, who have taken loans on floating rate basis. Significantly, nine out of 10 existing home loan borrowers are feeling the pinch with the latest rise in interest rates. For the simple reason that almost 90% of home loans borrowers have taken the loan on floating rate that are subject to frequent changes, following interest rate movements. In the private sector, ICICI Bank, which has the largest home loan portfolio, was the first to increase home loan rates to all new and existing customers. The bank’s home loans are now more expensive than rival HDFC’s and the revision may now see a rebalancing of its portfolio.