Bankers feel that with the global outlook on interest rates turning 'stable' from 'soft', there is no reason why Indian rates will move in an opposite direction.

ICICI Bank officials feel that interest rates will remain stable for the next six months, but they say it is difficult to predict where they will move in future.

Housing and Home Loans: Complete Coverage

HDFC managing director Keki Mistry said: "I do not see interest rates going down in the immediate future. They will remain stable for the next three-six months, and thereafter depend upon the liquidity in the system."

The Bank of England last month increased its bank rate by 25 basis points as the US Federal Open Markets Committee indicated that rates, already at historic lows, are unlikely to fall further.

In the Indian context, it is felt that the curb on ECBs and decreasing NRI deposits could have a negative impact on liquidity, especially with inflation on the rise.

"While banks hedge interest rate risks by entering into swaps, the home loan borrower, who reaps the benefits of floating rates only when the interest rates move southward, has no hedge against adverse movement in interest rates," said a senior official from a public sector bank.

Looking at the available broad economic indicators, the time may have come for the home loan borrowers to enter into fixed rate loans as interest rates more or less have bottomed out, he added.

A function of liquidity, interest rates have already fallen four per cent over the last two years; reserves have increased significantly; overseas interest rates have been at their all time low; and credit offtake has been low.

But all this, said bankers, will not last forever. Housing finance companies thus reasoned that the differential between the floating and fixed rate home loans is not more than 25 basis points for any maturity bucket and borrowers will be well-advised to get into fixed rate loans.

Investments made by banks are seen coming down in sync with the improved credit offtake and this could lead to a slight upward movement in interest rates.

The upswing in the stock market, which currently offers better return on investment, could exert pressure (read : outflow) on the deposits, resulting in banks being forced to hike interest rates.

Commercial banks, especially in the public sector, offer fixed-rate home loans of five-year tenor at eight per cent; above five years and up to 15 years at 8.50 per cent; and above 15 years and up to 20 years at 8.75 per cent.

The floating rate loans are available at 25 basis points below the fixed rate loans.