Home loan borrowers — who are the worst hit following steep rise in interest rates — are increasingly refinancing their loans with another lender or with the same lender to minimise the impact on hardening rates.
This is because the spread — the difference between the benchmark rate and the actual lending rate —has narrowed in the past year. Banks and housing finance companies have cut the spread for new customers amid stiff competition and the hardening of rates.
With the policy repo rate rising 250 basis points (bps) since May 2022, home loan rates which were around 6.2-6.3 per cent a year ago are now hovering around the 9 per cent mark.
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