What is Fixed Interest Rates Home Loans?
During the entire loan tenure, the interest rates continue to change in the entire course. Home loans offered at a fixed interest rate ensure that the borrower must pay fixed equal installments as home loan repayment. Afterall, not all borrower prefers floating interest rate home loans.
Market fluctuations do not affect fixed interest rates home loans, i.e., the interest rate remains the same no matter what the market conditions are. Even in the case of a reduction of key policy rates, there is scope for EMI outgo to reduce but in case of upward tweak in repo rates, there is equal scope for EMI outgo in increase.
(Wondering if what repo rate is? Well, here’s a hint: Repo rate is basically the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercials banks in the event of any shortfall of funds. Repo rate is used by monetary authorities to control price increases.)
Interest Rates for Fixed Rate Home Loans:
· HDFC Bank offers between 7.40% per annum and 8.20% per annum. (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 at 12.00% per annum.
Why Fixed Interest Home Loans?
Well, here are some benefits you can enjoy after taking fixed rate loans.
1. Under a fixed rate home loan, the interest rate remains fixed. There is no change irrespective the market fluctuations.
2. It ensures the financial security of the customers.
3. Interest rates in fixed rate home loans are higher than the floating rate home loans.
4. It enables a fixed monthly repayment schedule and easy budgeting which assists in long term planning.
Difference Between Fixed and Floating interest Rate Home Loans?
The difference between the fixed and floating interest rates could be much wider in normal circumstances. There could be a difference of at least 3-4% points, between the pricing of the fixed interest rates, home loans and the floating rates.
|FIXED INTEREST RATES HOME LOAN||FLOATING RATE HOME LOAN|
|THE INTEREST RATES REMAIN UNCHANGED THROUGHOUT THE TENURE PERIOD.||The interest rates vary as base rates changes in the market.|
|INTEREST RATES ARE HIGHER.||The interest rates are comparatively cheaper.|
|SCOPE OF NEGOTIATION IS ZERO.||Scope is higher in this case.|
Explanation: 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 the base rate, the floating interest rate varies as well.
Also, even if you have an impressive credit score, you may have to pay the standard interest. In the case of fixed home loans. Banks are too unwilling to negotiate on their rates.
Penalty on Changes in Home Loan Terms:
Every home loan has its own terms and conditions mentioned in the loan agreement. Once the agreement is signed up, the borrower must stick to the mentioned terms and conditions throughout the tenure period. In case of breach during any point of the loan tenure, penalties are charged by the banks.
Banks and HDFC bank’s offering Fixed interest Rate Home Loans:
Not every bank offers home loans at fixed interest rates. In fact, some of the large private lenders also not offer fixed rate home loans at all. So, the option for opting fixed home loans is limited.
|Bank||Fixed interest rate||Processing fees|
|HSBC Bank||Contact the bank||1% of the loan amount|
|HDFC Bank||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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