A fixed rate stays the same for the period the lender fixes it, which in India is often only the first few years. A floating rate moves with the benchmark the loan is linked to. Lenders cannot charge prepayment penalties on floating-rate home loans to individuals; fixed-rate loans may carry them.
Side by side
Factor
Fixed rate home loan
Floating rate home loan
Rate
Fixed for a period set in the loan
Moves with the linked benchmark
EMI certainty
High during the fixed period
Lower; EMI or tenure changes
Starting rate
Usually higher
Usually lower
Prepayment charges for individuals
May apply
Not allowed under RBI rules
After the fixed period
Often converts to floating
Stays floating
Benefits when rates fall
No
Yes
Switching
Possible for a fee
Possible to fixed for a fee, if offered
When Fixed rate home loan matters
A fixed rate suits a borrower who values a predictable EMI over the fixed period and does not plan to prepay early.
When Floating rate home loan matters
A floating rate suits a borrower who expects to prepay, wants lower starting rates, and can absorb rate rises.
In more detail
Many "fixed" home loans in India are fixed only for an initial period and then become floating. Read the reset clause.
When a floating rate changes, lenders usually extend the tenure first rather than raise the EMI. RBI rules require lenders to tell borrowers and offer a choice between a higher EMI and a longer tenure at reset.