What are the factors determining rate of interest for home loans? According to RBI guidelines, the Marginal Cost of Lending Rate (MCLR) is the method that should be used by banks to determine the interest rate on home loans. For floating rates, banks adjust the rate annually or bi-annually according to prevailing interest rates. Besides this, economic conditions such as demand for credit, inflation, etc., and at the individual level, the applicant’s risk profile and credit score are some other factors that affect the interest rate on home loans home loan flat loan , mortgage loan housing loan, loan against property , building construction loan , mortgage loan process