Choosing Fixed Or Floating Home Loan Rate

A home loan or housing finance has become an indispensable requirement today. People with a need to purchase a new home or land require such monetary assistance. You can seek this loan if your current financial condition doesn’t allow you foot expenses involved in such expensive housing projects. However, the interest rate has always been crucial point in acquisition of a housing finance.

Choosing a right kind of rate has always been a classical dilemma for prospective borrowers. Since the rate of interest is available as fixed and floating, customers or loan consumers become wishy-washy whether to choose “fixed” or “floating” rate.

There has been unforeseen dramatic fluctuation in home loan interest rates in the market for the past few years. That makes consumers scrupulously choose suitable and ideal rate to narrow down selection of the best loan rate. The market’s statistic meter clearly indicates a steeple slump of 7% from the last few years which supposedly indicated another slump in future as well.

However, the sudden hike of 10% on floating rate in January 2007 has shattered the supposedly downfall of the interest rate. The hike was also believed to be the most unexpected and dramatic occurrence in the market.

Floating rate is traditionally believed to be of temperamental nature. Slump or hike in such type of rate is subject to unpredictable mood of financial or share market. Hence, any consumer, preferring housing finance on such rate, might undergo an experience of dramatic fluctuation as per the share market norms.

In contrast to floating rate, the fixed rate has nothing such dramatic fluctuation. It remains constant up to certain years until the bank rephrases the loan term. No doubt, such rate, being expensive, might burn a hole in your pocket when it comes to paying EMIs.

A consumer should scrupulously study the past market trends to conceptualise fluctuating interest rates, current rates and benefits associated. A well informed customer can always make a right decision in choosing an ideal rate of interest on housing finance.

Banks have prerogative to rephrase fixed rate. That means, even fixed rate is changeable. In that case, customers should opt for “transparent floating” interest rate. Such rate has direct relationship with base rate. If one slumps, then the other also slumps and vice versa.

Both fixed and floating interest rates have their characteristic approach. Assuming that the home loan rate will slump in future, consumer should opt for floating rate. On the contrary, if the rate is expected to hike in future, better stick to fixed rate.

Choosing between a fixed and floating home loan interest rate has always been a classic dilemma for home loan consumers. There are many important points that consumers need to consider before choosing either of the interest rates.