Fixed vs Floating Rate: Which Actually Saves You More?
We ran the numbers across 10 years of RBI rate changes. Fixed gives certainty, floating gives flexibility. The math says one wins clearly.
10-year comparison: ₹50L home loan
over 10 years (but with volatility)
Fixed rate: certainty at a premium
Fixed rate locks your EMI for the entire tenure. You know exactly what you'll pay every month. The downside: fixed rates are typically 0.5–1.5% higher than floating rates. On a ₹50L loan over 20 years, that 0.5% premium costs you ₹5.8L extra in interest. Banks love fixed rates because they protect against rate drops — the bank wins either way.
Floating rate: cheaper but unpredictable
Floating rates are linked to RBI's repo rate (via EBLR/RLLR). When repo rate drops, your EMI drops. When it rises, your EMI rises. Over the last 10 years, repo rate ranged from 4.0% to 6.5%. The average floating rate borrower paid 0.3–0.7% less than fixed rate borrowers. But during 2022-23, floating rate borrowers saw EMIs jump by ₹3,000–₹5,000/month on ₹50L loans.
The honest verdict
For most borrowers, floating rate wins over any 10+ year period because RBI rate cycles average out. But if you can't handle EMI volatility or are stretching your budget, fixed rate buys you peace of mind — at a measurable cost. Never take fixed rate from an NBFC (they charge 2–4% foreclosure penalty). Banks can't charge prepayment penalty on floating rates (RBI rule).
What to do
1. **Take floating rate** if your tenure is 10+ years and you can handle ±₹3,000 EMI swings.\n\n2. **Take fixed rate** only if you're maxing your EMI capacity and can't afford increases.\n\n3. **Never take fixed from an NBFC** — the foreclosure penalty makes switching impossible.\n\n4. **Review annually** — you can switch from fixed to floating (or vice versa) with most banks for ₹2,000–₹5,000.