The latest bout of home loan rate hikes should leave no doubt in the minds of home loan seekers that interest rates are well and truly bound on a northward journey. If interest rates rise even further, it is unlikely that home loan rates will remain unscathed.

Another reason why home loan rates have hardened is because the Reserve Bank of India [Get Quote] has called for stricter provisioning norms on home loans. This means that home loan companies will now have to provide for a larger sum of money against their home loan assets. It is not surprising that they have passed on a portion of this burden to the consumer by hiking home loan rates.

Evident from the above table is the discernible rise in the home loan rates across companies. For instance, HDFC's fixed rate home loans have inched upwards to 10.50 per cent. Correspondingly, the floating rate on home loans has also moved up to touch 9.25 per cent. For IDBI Bank, fixed rate loans (fixed for 5 years) are now available at 10.00 per cent (up 0.50 per cent) while floating rate loans can be availed at an interest rate of 9.00 per cemt (up 0.50 per cent).

What should home loan seekers do?
Going by the trend, it should surprise no one if interest rates on home loans rise even further as a consequence of the rising interest rate scenario. This being the case, home loan seekers should consider opting for a fixed rate loan (i.e. fixed for 3-5 years). This will protect them from a potential interest rate hike in the near term. At the end of the said 3-5 year term, they have the option of considering either to continue with the 'fixed' rate (if interest rates continue to rise) or migrate to a floating rate loan