Fixed rates loans the best option

The RBI increased the repo and reverse repo, the rates at which it lends to and borrows short-term money from banks, by 25 basis points. It hiked the cash reserve ratio (CRR), the portion of money that commercial banks deposit with the central bank, by an identical percentage. The move was to draw out Rs 12,500 crores from the system. The hike in the repo and reverse repo rates, to 5.25 and 3.75 percent respectively, will raise the cost of funds for lenders.
At that time, borrowers could breathe easy as there was enough liquidity in the system. The policy actions resulted in the cost of funds going up which was absorbed by the banking system. Moreover, the RBI had said that it will continue to monitor macroeconomic conditions, particularly the price situation, closely and take further action as warranted. The three major factors that could have a bearing on inflation are uncertain monsoons, volatile prices of crude oil in the international markets and demand pressures.
Presently, all these factors are uncertain. The global factors including the euro crisis, volatility in the stock markets, Greece debt crisis, oil prices etc are all causes of concern. At home, the inflation rate hasn't really reversed. The economic growth is contingent to a large extent on the monsoons that are not yet very certain.
All these micro and macro indicators indicate that the interest rates may again increase in the coming months. A bad monsoon, global cues, and spiralling inflation, can push up interest rates again.
Realty attractive
Following the global slowdown the property prices went through a correction. Now, as the economy has staged a recovery, the prices too are on an upward trend. There is more job security and homebuyers are back in the market.
Regardless of the interest rate movements, this is a good time for those planning to buy property to make a move. The question is which option to go for between fixed and floating rates.
Fixed rate ideal
Those planning to purchase a house may do well to lock-in their borrowing now. They should go in for a fixed rate loan. As such, there is no concept of fixed rate loans for the entire tenure of the home loan. Nowadays, the term fixed rate loan is relative. The interest rate is generally fixed for only two or three years, after which it is subject to revision, depending on the market rates of interest. Yet, one should lock into a fixed rate loan.
Some analysts indicate that home loan interest rates may rise in the near future. There are indicators to this effect. The high inflation rate of around 10 percent could affect the stable macroeconomic and interest rate environment here.