Fixed rate home loans suit those borrowers who want absolute certainty about their debt obligation.
With lowering of risk weightage, the requirement of capital provision for banks will come down.
Although most home loan borrowers prefer floating interest rate home loans, there are many who opt for fixed interest rate home loans. Fixed rate home loans suit those borrowers who want absolute certainty about their debt obligation. The interest rates of these loans are usually slightly higher than floating rate loans, but their EMIs are fixed throughout the loan tenure unlike their floating rate counterparts whose rates fluctuate from time to time. Fixed rate loans also suit those borrowers who are looking for a short to mid-term home loan with a tenure of up to 10 years.
It’s a fact that ever since banks launched repo-linked floating interest rate home loans in October last following a Reserve Bank of India directive, many banks are currently offering such loans starting at under 7% p.a. However, the interest rates on these loans will swiftly and proportionately increase whenever the central bank decides to hike the key policy rate in the future, according to BankBazaar.
Fixed rate borrowers would be free of such concerns over interest rate hikes by paying a slightly higher rate in comparison throughout the loan tenure. A fixed rate home loan EMI, when manageable in your budget, allows greater clarity about your loan burden, and makes it easier for you to allocate savings and investments towards your other equally important financial goals like building a fund for your children’s higher education or setting up an adequate retirement fund.
That being said, borrowers must realise that ideally all their debt obligations should not exceed 40% of their monthly household income. They should also realise that foreclosing or part-prepaying their fixed interest rate home loans might involve paying additional penalties unlike floating rate home loans. Also, their applicable interest rate would be ascertained based on a number of factors like their gender (women usually get preferential rates), age, income, credit score (should be above 750-800 for the best rates), loan amount, loan tenure, etc, says BankBazaar.
Moreover, some lenders may allow fixed rate only for a definite period and thereafter prevailing floating interest rate would apply. Additionally, borrowers can switch from a fixed rate to a floating rate home loan after paying a fee for such a switch.
So, if you’re looking for a fixed interest rate housing loan, here is a list of what the leading banks and housing finance companies (HFCs) in India are offering currently.
Interest rates for fixed rate home loans offered by leading banks and housing finance companies
Disclaimer: Fixed interest rates may be subject to a revision after a specified tenure depending on the lender’s T&Cs. List not exhaustive and includes lenders whose data is readily available. Data taken from respective lender’s website as on September 21, 2020. Compiled by BankBazaar.com