Fixed vs Floating Interest Rate: Which Home Loan Type Saves You More?

Fixed Rate vs Floating Rate: The Basics

A fixed rate stays the same throughout the loan tenure. A floating rate changes with the RBI repo rate and the bank's MCLR/EBLR. In India, most home loans are floating rate — but should they be?

How Floating Rates Work

Floating rates are linked to the RBI's repo rate (currently 6.50%). When the repo rate goes down, your EMI decreases. When it goes up, your EMI increases — or your tenure extends.

Over the last 10 years, the repo rate has fluctuated between 4.00% and 6.50%, causing home loan rates to swing by 2-3 percentage points.

When to Choose Fixed Rate

You want predictable EMIs for budgeting
Interest rates are at historic lows and likely to rise
Your loan tenure is short (under 10 years)
You cannot absorb a 20-30% increase in EMI

When to Choose Floating Rate

Interest rates are high and likely to decrease
You want to benefit from future rate cuts
Your loan tenure is long (15-30 years) — floating rates tend to average lower over time
You can handle EMI fluctuations

The Numbers: A Real Example

For a Rs 50 lakh home loan over 20 years:

Fixed at 9.5%: EMI = Rs 46,607 | Total interest = Rs 61.86 lakh
Floating at 8.5%: EMI = Rs 43,391 | Total interest = Rs 54.14 lakh
Savings with floating: Rs 7.72 lakh (if rates stay stable)

The Verdict

For most Indian borrowers, floating rate is better for long tenures because rates tend to cycle. But if you are risk-averse and taking a short-tenure loan, fixed rate offers peace of mind. Compare both options on JaldiMoney to see your personalized numbers.