A "low interest" loan shouldn't mean you have very little interest in paying it back!
  • Fixed Rate Home Loans

    Home loans offered at fixed rate of interest ensures that the borrower only has to pay fixed equal installments as home loan repayment, during the entire loan tenure. Market fluctuations do not affect fixed rate home loans, i.e., the interest rate remains the same no matter what the market conditions are. Most of the time, monthly payments made during the initial stages of home loan repayment is used to pay out the interest and when payments are made in the later stages of the monthly repayment of the loan, the principal is serviced.

    Interest Rates for Fixed Rate Home Loans:

    • HDFC Bank offersbetween 7.40% p.a. and 8.20%p.a. (depending on the loan quantum) which is fixed for a term of two years only and is reset after this period.
    • Axis Bank’s fixed interest rate home loan scheme comes at12.00% p.a.

    Benefits of taking Fixed Rate Home Loans:

    • There is no change in the rate of interest, irrespective of market fluctuations
    • A fixed-rate home loan assists in long-term planning and budgeting by enabling a fixed monthly repayment schedule, which is easy to budget and doesn't fluctuate
    • It ensures financial security since customers need not expect any future risks.

    Fixed Rate Home Loans and Floating Rate Home Loans:

    Fixed rate home loans have fixed interest rates during the entire tenure of loan and this rate is not privy to change no matter what happens. Floating home loan interest rates change with changes in market conditions. Home loans that are offered on floating interest are attached to a base rate as well as a floating element therein. Hence, with a variation in base rate, the floating interest rate varies as well. One of the highlights of a floating rate home loan is that it is cheaper than fixed interest rates. In a fixed rate loan wherein the interest rate is stable, the interest rate is higher than that of the floating rate home loan.

    How does Fixed and Floating Rates Work?

    In India, floating rate loans are not really varying consistently. RBI has instructed banks to bring down rates for all customers. However, bank lower prevailing interest rates for new customers and changes them later on with changes in the financial market. Older customers continue paying the interest rate set for them during the initial stages and do not enjoy the privilege of the lower interest rate extended to new customers. When interest rates come down, the EMI in a floating rate home loan is often kept stagnant and only the tenure of the loan is altered. Fixed rate loans also have terms and conditions reset clauses and riders which can affect the interest rate when there are market fluctuations. The 'reset clause', which is subject to revision. Though the nature of the clause depends on the Bank’s regulations after a fixed period or with a sharp hike in interest rates the interest rates can be revoked.

    Major Banks that offer Fixed Rate Home Loans:

    • HSBC India
    • HDFC Bank

    Compare Fixed Home Loan Interest Rates

    Bank Fixed Rate Processing Fees
    HSBC Bank Contact the bank 1% of the loan amount
    HDFC 7.40% p.a. to 8.20% p.a. 0.5% of the loan amount
    Axis 12% p.a. Up to 1% of the loan amount

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