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What factors determine mortgage interest rates?

Curious about Mortgage rates

What factors determine mortgage interest rates?

In India, mortgage interest rates are determined by various factors, including:

1. The Reserve Bank of India's (RBI) monetary policy: The RBI sets the benchmark interest rate, which affects the overall interest rate environment in the country.

2. Inflation: Higher inflation usually leads to higher interest rates as lenders want to compensate for the decreased purchasing power of money.

3. Creditworthiness: Borrowers with a good credit score and a low debttoincome ratio are typically offered lower interest rates.

4. Loantovalue ratio: The loantovalue (LTV) ratio represents the percentage of the property value that the lender is willing to loan. A lower LTV ratio can result in a lower interest rate.

5. Type of mortgage: The type of mortgage can also impact the interest rate. For example, fixedrate mortgages usually have higher interest rates than adjustablerate mortgages.

6. Market conditions: The demand for mortgage loans and the supply of available funds also impact interest rates. When demand is high and supply is low, interest rates tend to rise.

It's important to note that these factors can change over time, so mortgage interest rates can fluctuate as well.

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