The chances of further reduction in rate are very less. However, home borrowers should not overlook the possibility of rate hike from current levels. Since rate transmission is now smooth, any rate increase reserve Bank of India Will reflect immediately in their home loan rate. Any increase in home loan rates will add up EMI (Or credit period) and can mess up your financial plan.

For example, the EMI for a home loan of Rs 1 crore for 20 years at the rate of 7.7% would be Rs 75,739. The same will go up to Rs 81,787 @ 7.7% and will go up to Rs 8.8,052 @ 8.7%. The best thing to do in such situations is to go for a fixed rate loan. However, the options are very limited and only a few options offer fixed rates, that too for a limited period. More importantly, it is partly fixed-rate home loan charge too high interest rates.

Partially Fixed Loans Will Cost You More

Consider the additional costs before taking a partial fixed loan.

While this rate hike is not in your hands, you can make up for it by assuming a higher interest rate. “Instead of the very low rates right now, assume a reasonable home loan rate of around 8.5% and invest the remaining EMIs systematically elsewhere,” says Aparna Ramachandra, Founder and Director, RectifyCredit.com. For example, a 20 year home loan EMI of Rs 1 crore is Rs 86,782 @ 8.5% and it will be Rs 75,739 @ 6.7%. You should invest the difference of Rs 11,043 every month in a short term debt fund. This fund will act as a backup in case rates rise. You will be in a better position even if the rate doesn’t go up because this money will go to savings instead of spending.