Housing Finance Firms After the Rate Hike: Margins in Focus

Quick answer: One 25 bps hike alone is unlikely to change the sector, experts say. What matters is how long rates stay high, because funding costs, margins, credit growth and competition will shape which lenders do well.

What are analysts saying?

BankBazaar CEO Adhil Shetty said the RBI's signal that rate cuts may not come soon could keep borrowing and deposit costs elevated. He said a 25 bps hike by itself is unlikely to alter the consolidation trend among housing finance companies, but longer-lasting high rates would make funding cost a bigger competitive factor, especially for lenders with less diversified funding. He added that housing credit remains robust and growing steadily.

 

Why is the "spread" the number to watch?

Can Fin Homes' July-September results show it clearly. Its loan yield was 9.84% and its cost of borrowing 7.03%, a gap of about 2.8 percentage points (our arithmetic). Profit rose 9.2% to Rs 274.61 crore and the loan book grew 10% to Rs 43,539 crore, but disbursements fell about 7% from a year earlier.

What does it mean for borrowers?

Lenders with cheaper funding can offer sharper rates, so comparing several lenders matters more when rates rise.