What is Floating Interest Rate for housing loans As the name suggests, floating interest rate varies with the market scenario. If you opt for a home loan with a floating interest rate, it means that you will be subjected to a base rate and a floating element will be added. This means that if the base rate changes, the floating rate will also vary. The main highlight of floating interest rate is that they are cheaper than fixed interest rate. For example, if the fixed interest rate is 12.25 % and floating interest rate is 8.75%, you will still be saving money even if the floating interest rate rises by 3.5% points. Further, even if the floating interest rate rises above the fixed rate, it will be temporary, and not for the entire tenure of the loan. The main drawback of floating interest rate is the fact that it is difficult to budget as it may change frequently. Planning your financials on a long term basis can be difficult with this type of interest rate home loans , mortgage loan , loan against property , housing loan , home construction loan , flat purchase loans