Home-loan interest rates are once again looking up. ICICI Bank recently announced a 100bps rise in its prime lending rates to 11.75%. Does the frequent hike in home-loan rates signify that a borrower needs to go for fixed rather than floating home-loan rates?
Your choice for interest rates should rest on three factors. First, choosing a type of interest rate is not a one-time decision. You need to re-visit it regularly because if interest rates tend to move downwards, even fixed interest rates can put you in trouble. Second, very few banks offer genuinely fixed rates. Third, fixed rates are not transparent, they tend to be higher than floating rates by around 1.5%, which seems quite high. Moreover, never forget to negotiate the rates as those offered by various banks are only rack rates.