Detailed Analysis
The fixed vs floating debate is important for home loan borrowers, though the choice is more nuanced in India.
Fixed rate home loans in India are rarely truly fixed for the full tenure. Most banks offer fixed rates for 2-3 years, then convert to floating. The initial rate is 1-2% higher than floating. Genuine long-term fixed rates are rare and expensive.
Floating rate loans are linked to external benchmarks (repo rate) since RBI's mandate. When RBI cuts rates, your EMI reduces. When rates rise, EMI increases. Over long tenures (15-20 years), floating rate borrowers typically pay less total interest due to rate cycle averaging.