Fixed vs floating home loan interest
A floating home loan moves up and down with the RBI repo rate; a fixed home loan is locked at the rate you signed. On a 20-year home loan, this choice can swing total interest by lakhs of rupees.
Last updated: 15 June 2025
Quick comparison
| Feature | Floating rate | Fixed rate |
|---|---|---|
| Current rate range | 8.35% – 9.5% | 9.5% – 11% |
| Rate changes | With RBI repo movement | No change during locked period |
| Foreclosure charges | Nil (RBI rule) | 2-3% typical |
| Best for | Long tenure, expecting rate cuts | Short tenure, wanting certainty |
Why floating is the default in India
Since October 2019, RBI has mandated that all new retail floating-rate loans be linked to an external benchmark (usually the repo rate). This makes rate transmission cleaner and gives borrowers the benefit of RBI cuts. Almost 95% of new home loans in India are on floating rates.
When fixed makes sense
- You expect rates to rise sharply over the next 3-5 years
- You are within 5 years of retirement and want predictability
- You are financially conservative and value certainty more than lowest cost
Hybrid loans
Some banks offer part-fixed, part-floating loans - typically fixed for the first 2-5 years, floating thereafter. These offer short-term certainty while retaining long-term repo-linked benefits.