When Sandip More, 31, took a floating rate Rs 25-lakh home loan 18 months ago at 8%, he reckoned that the 20-year repayment schedule would be a breeze.

But to his surprise despite paying a monthly installment of Rs 20,911 for the past 18 months, he found his loan tenure increase from 20 to 22 years due to two consecutive rate hikes of 0.5% each in the last one year. What’s further worrying Sandip is another rate hike will further propel his tenure to beyond 23 years.

Like Sandip most borrowers have reckoned with a rate increase of about 0.5 per cent till last year. But another 0.25 per cent hike — which was signalled by the Reserve Bank today — could bite into the pockets of home owners.

In the coming months as demand for credit soars from the businesses and elsewhere interest rates hikes could be sharper and most banks reckon could be as high as 0.5 to 1% in a year.

As of now, the interest rate for home loan is around 8.75-9% on a floating rate basis, which is expected to increase to around 9.5% or even 10% in sharper circumstances. In fixed rate loans, it is 0.5% higher. ‘‘There’s a definite hardening of interest rates and in the near term of 3-6 months home loan rates could go up by around 25 basis points,’’ says Harsh Roongta, CEO, Apnaloan.

Back of the envelope calculations show that if the interest rate rises by merely 0.25% for a Rs 20 lakh loan (from 8.5 to 8.75%), borrowers will have to shell out about 1.83% more in monthly outflows.

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