Compare floating and fixed rate home loans. Understand how interest rates affect your EMI, total cost, and which option suits different market conditions.
Floating or fixed rate? This decision can save or cost you lakhs over your home loan tenure. In India, most borrowers choose floating—but is that always right?
Understanding how both work helps you make a smarter choice.
The Basics
What Is Floating Rate?
| Feature |
Details |
| Linked to |
Repo rate, MCLR, or external benchmark |
| Changes |
Whenever RBI changes rates |
| EMI behavior |
Increases or decreases with rate |
| Typical spread |
2-3% above benchmark |
What Is Fixed Rate?
| Feature |
Details |
| Rate |
Locked for a period (usually 2-5 years) |
| Changes |
No change during fixed period |
| EMI behavior |
Constant during fixed period |
| After fixed period |
Usually converts to floating |
Note: True "fixed for entire tenure" loans are rare in India.
Calculate your EMI: Use our EMI Calculator to compare both options.
Current Home Loan Rates (2024)
Floating Rate Loans
| Bank |
Rate |
Benchmark |
| SBI |
8.50% onwards |
EBLR |
| HDFC Bank |
8.75% onwards |
MCLR |
| ICICI Bank |
8.75% onwards |
EBLR |
| Axis Bank |
8.75% onwards |
MCLR |
| Kotak |
8.75% onwards |
EBLR |
| LIC Housing |
8.50% onwards |
MCLR |
Fixed Rate Loans (Where Available)
| Lender |
Fixed Period |
Rate |
After Fixed Period |
| Some HFCs |
2-3 years |
9.5-10% |
Converts to floating |
| Very few |
5 years |
10-11% |
Converts to floating |
Fixed rate typically 1-1.5% higher than floating at start.
How Floating Rate Changes Affect You
Rate Increase Scenario
₹50 L loan, 20 years, Rate increases from 8.5% to 9.5%:
| Rate |
EMI |
Total Interest |
Change |
| 8.5% |
₹43,391 |
₹54.14 L |
Baseline |
| 9.0% |
₹44,986 |
₹57.97 L |
+₹1,595/month |
| 9.5% |
₹46,607 |
₹61.86 L |
+₹3,216/month |
| 10.0% |
₹48,251 |
₹65.80 L |
+₹4,860/month |
1% rate increase = ₹7.72 L extra interest over full tenure.
Rate Decrease Scenario
₹50 L loan, 20 years, Rate decreases from 8.5% to 7.5%:
| Rate |
EMI |
Total Interest |
Savings |
| 8.5% |
₹43,391 |
₹54.14 L |
Baseline |
| 8.0% |
₹41,822 |
₹50.37 L |
₹3.77 L |
| 7.5% |
₹40,280 |
₹46.67 L |
₹7.47 L |
| 7.0% |
₹38,765 |
₹43.04 L |
₹11.10 L |
1% rate decrease = ₹7.47 L savings over full tenure.
Historical Interest Rate Trends (India)
Home Loan Rate History
| Period |
Typical Rate |
Trend |
| 2008-2010 |
11-12% |
High |
| 2011-2015 |
10-11% |
Moderate |
| 2016-2019 |
8.5-9.5% |
Declining |
| 2020-2021 |
6.75-7.5% |
Historic lows |
| 2022-2024 |
8.5-9.5% |
Rising |
Key insight: Rates have ranged from 6.75% to 12% over 15 years.
What This Means for You
| Starting Rate |
Historical Experience |
| At highs (10%+) |
Likely to fall eventually |
| At lows (7%) |
Likely to rise eventually |
| Mid-range (8.5%) |
Could go either way |
When to Choose Floating Rate
Best Scenarios for Floating
| Scenario |
Why Floating Works |
| Rates at historic highs |
Will likely come down |
| You can afford higher EMIs |
Buffer for rate increases |
| Long tenure (15+ years) |
Rates cycle through highs and lows |
| Planning prepayments |
Lower rate when prepaying |
Floating Rate Advantages
| Advantage |
Details |
| Lower starting rate |
1-1.5% less than fixed |
| Benefit from rate cuts |
EMI reduces when rates fall |
| No prepayment penalty |
Usually zero for floating |
| Flexibility |
Can switch/refinance easily |
When to Choose Fixed Rate
Best Scenarios for Fixed
| Scenario |
Why Fixed Works |
| Rates at historic lows |
Lock in before they rise |
| Tight monthly budget |
Predictable EMI |
| Risk-averse |
Don't want EMI surprises |
| Short tenure (5-7 years) |
Fixed period covers most of loan |
Fixed Rate Advantages
| Advantage |
Details |
| EMI certainty |
No surprises for fixed period |
| Budget stability |
Easy financial planning |
| Protection from hikes |
Insulated from rate increases |
Fixed Rate Disadvantages
| Disadvantage |
Impact |
| Higher starting rate |
More interest initially |
| Prepayment penalty |
May apply (check terms) |
| Converts to floating |
Not truly fixed for full tenure |
| Miss rate cuts |
Don't benefit if rates fall |
The Hybrid Approach
What Is a Hybrid Loan?
| Structure |
Details |
| Initial period |
Fixed rate (2-5 years) |
| After fixed period |
Converts to floating |
| Purpose |
Best of both worlds |
When Hybrid Makes Sense
| Situation |
Hybrid Benefit |
| Rates at lows |
Lock in low rate initially |
| Uncertain about future |
Flexibility after fixed period |
| Planning to prepay early |
Fixed portion covers high-interest years |
Decision Framework
Choose Floating If
| Criterion |
Check |
| Current rates are high (> 9.5%) |
✓ |
| You expect rates to fall |
✓ |
| Can handle 20% EMI increase |
✓ |
| Plan to prepay significantly |
✓ |
| Long tenure (15+ years) |
✓ |
Choose Fixed If
| Criterion |
Check |
| Current rates are low (< 8%) |
✓ |
| You expect rates to rise |
✓ |
| Budget is tight |
✓ |
| Need EMI certainty |
✓ |
| Short tenure (< 7 years) |
✓ |
Managing Rate Risk in Floating Loans
Strategy 1: Buffer EMI
| Approach |
Implementation |
| Pay higher EMI voluntarily |
10-15% more than required |
| Creates prepayment buffer |
Reduces principal faster |
| If rates rise |
You're already paying higher |
| If rates fall |
Extra goes to prepayment |
Strategy 2: Tenure Flexibility
When rates increase, banks may offer:
| Option |
Impact |
| Increase EMI |
Keep tenure same |
| Extend tenure |
Keep EMI same |
| Combination |
Moderate both |
Tip: Choose increased EMI if affordable—extending tenure costs more.
Strategy 3: Refinancing
| When to Consider |
Action |
| Other bank offers 0.5%+ lower |
Consider balance transfer |
| Your credit score improved |
Negotiate better rate |
| You've repaid 2-3 years |
Good candidate for refinance |
Impact Analysis: Real Scenarios
Scenario 1: Rates Rise 1.5%
₹60 L loan, 20 years, Rate: 8.5% → 10%
| Factor |
At 8.5% |
At 10% |
Impact |
| EMI |
₹52,069 |
₹57,901 |
+₹5,832/month |
| Total interest |
₹64.97 L |
₹78.96 L |
+₹13.99 L |
If you can't afford ₹5,832 more, floating is risky.
Scenario 2: Rates Fall 1.5%
₹60 L loan, 20 years, Rate: 8.5% → 7%
| Factor |
At 8.5% |
At 7% |
Savings |
| EMI |
₹52,069 |
₹46,518 |
-₹5,551/month |
| Total interest |
₹64.97 L |
₹51.64 L |
₹13.33 L |
Floating loan benefits significantly if rates drop.
What Most Indians Choose
Market Reality
| Rate Type |
% of Borrowers |
| Floating |
90%+ |
| Fixed/Hybrid |
< 10% |
Why Floating Dominates
| Reason |
Explanation |
| Lower starting rate |
Attracts borrowers |
| Limited fixed options |
Few banks offer true fixed |
| Historical rate declines |
Benefited floating borrowers |
| Bank preference |
Banks prefer floating (passes risk to borrower) |
Making Your Decision
The Checklist
| Question |
Floating |
Fixed |
| Are current rates at historic highs? |
Better |
Avoid |
| Are current rates at historic lows? |
Risky |
Better |
| Can I handle 20%+ EMI increase? |
OK |
Needed |
| Is my budget tight? |
Risky |
Safer |
| Tenure > 15 years? |
Better |
OK |
| Planning prepayments? |
Better |
Check penalty |
Quick Decision Guide
| Current Rate Environment |
Recommendation |
| Very high (> 10%) |
Floating (rates likely to fall) |
| High (9-10%) |
Floating with caution |
| Medium (8-9%) |
Either (based on risk tolerance) |
| Low (< 8%) |
Fixed/Hybrid if available |
| Very low (< 7%) |
Fixed (lock in the rate) |
Conclusion
| Factor |
Floating Wins |
Fixed Wins |
| Starting cost |
✓ |
|
| Rate cut benefit |
✓ |
|
| Budget certainty |
|
✓ |
| Historic low rates |
|
✓ |
| Historic high rates |
✓ |
|
| Prepayment flexibility |
✓ |
|
Bottom line for most borrowers:
- Choose floating if rates are high or you have EMI flexibility
- Choose fixed/hybrid if rates are at lows and you need certainty
- Build buffer regardless of choice—prepay when possible
- Monitor and refinance if better rates become available
Most Indians are well-served by floating rates due to lower starting costs and flexibility. But if you catch rates at historic lows, locking in can be the smarter move.
Calculate your loan EMI: Use our EMI Calculator to see how rate changes affect your payments.
