The Home Loan Rate Pendulum
By Joseph Samson
Print    Email    RSS   

Interest Rates for Home Loans are undoubtedly the most important parameter for a consumer while considering his loan agreement. The country's housing loan segment has seen various fluctuations in interest rates over the past two years. Home loan seekers have faced dramatic interest rate changes caused by variations in economic parameters. The Reserve Bank of India (RBI) has played a vital role in influencing home loan rates through its monetary policy tools such as Cash Reserve Ratio (CRR), Repo rate, Bank rate, etc.

The Monetary policy and its effect

CRR is a mandatory cash requirement of banks with the RBI and is fixed as a percentage of total deposits. If the CRR is reduced, more money if left to chase the same number of borrowers and interest rates come down. Similarly if CRR is increased, money supply in the economy declines and interest rates rise.

Bank rate is the minimum rate at which the central bank provides loans to the commercial banks. It is also called the discount rate. Usually, an increase in bank rate results in commercial banks increasing their lending rates. Changes in bank rate affect credit creation by banks through altering the cost of credit. Bank rate is directly related to the interest rates.

Repo rate is the short term lending rate of RBI to commercial banks. A hike in the repo rate raises the interest rates charged by the banks and vice-versa.

Floating or Fixed

Home loans are offered in floating rates and fixed rates that often leave home loan seekers in a dilemma. This is because many of them do not know the exact nature of differentiation between fixed rates and floating rates.

Fixed rates home loans are loans available with a fixed rate of interest for a given period of time such as 3 years, 5 years and so on. While floating rates home loans are linked to the prevailing market rate of interest and are therefore subject to change at periodical intervals. Typically, a floating rate is brought up for review once every three months. However, the time period can differ across banks and housing finance companies (HFCs).

A Historic Perspective

The past two years have witnessed huge variations in home loan interest rates. In fact in the year 2007, interest rates fluctuated quite often. The year started with revision of interest rates in the upward direction but somewhere between August and September the fluctuating trend emerged.

Page  | 123 |  
(Comments Posted : 2) Post Your Comments
1. Greetings to you all! My name is Mr Abdul Majeed, a private and reputable loan lender. I render all kind of loan to individuals with an interest rate of 3% with a repayment length of 1 to 30 years maximum. A lot of people have benefited from my loan offer and it have change their lifestyle positively giving them the opportunity to create their own business.
I render loan such business loan, agricultural loan, education loan, house loan, automobile loan, etc. If you are in need of a loan, kindly fill the borrower form below with your valid details and reply back for more information at

Full Name:
Home Address:
Amount Needed:
Currency Needed:
Loan Duration:
Monthly income:
Phone: Number:
Purpose for Loan:
Website you saw our ads:

Note: All reply should be forwarded only to for immediate attention.
Do you need an urgent loan? (Posted: Dec 4, 2015)
2. The definition of repo rate is lacking. It is a short term rate but for a great piece on historical direction of Indian interest rates over the last few years you might have wanted define it properly so readers and potential borrowers know exactly what it means.
Sharat (Posted: Oct 9, 2008)
Show All Comments
 Select a product:

 Select a product:

Know your home loan better
Credit profile and its effect on loan...
e-filing of income tax returns at...
Save tax with ELSS
Stop worrying for your home loan: Get it...

OUT MUSCAT 彡((+27717104310 SOHAR - ABORTION...
PINJORE: CaℒL Giℛℒs In PiNjOrE 09915787550...
PINJORE: CaℒL Giℛℒ In PiNjOrE 09915787550...
how to gate my home loan certificate

Canara Bank earned a profit of 60%. Feb 6, 2015
New Branch of Laxmi Vilas bank at Vijayawada Jan 30, 2015
Home loan EMIs expected to drop down Jan 21, 2015
Corporation Bank received MSME banking excellence award 2014 Jan 19, 2015
Home loan rates set to fall, after reduction in repo rate Jan 16, 2015
News Archive