The product is designed to give borrowers a fixed EMI during the selected period, insulating them from any increase in the repo-linked interest rate during that tenure
. After the fixed-rate period ends, the loan will automatically move to a floating-rate structure linked to the repo rate plus a predefined spread disclosed at the time of sanction.
The bank said the product is available for both home loans and loans against property. It is being offered at a price comparable to its floating-rate home loans, with no separate premium for choosing the hybrid structure.
How the hybrid loan works
Borrowers can select a fixed-rate period of 39, 52 or 65 months. During this period, the interest rate and EMI remain unchanged even if the Reserve Bank of India raises the repo rate.
Once the selected period ends, the loan converts to a floating-rate structure. The applicable spread over the repo rate is disclosed upfront when the loan is sanctioned.
The facility is available across India to eligible salaried and self-employed borrowers, subject to the bank’s credit assessment and other applicable terms.
What the bank’s illustration shows
Kotak Mahindra Bank has provided an illustration based on a 25-year loan tenure, a starting interest rate of 7.60% and a 65-month fixed-rate period. It assumes a cumulative 125 basis point increase in the repo rate from the current 5.25% to 6.50% during the fixed period.
For a ₹1 crore loan, the illustration puts the starting EMI at ₹74,550. Under the assumed rate increase, the floating-rate EMI rises to more than ₹82,450 by the 65th month, while the EMI under the hybrid loan remains at ₹74,550 during the fixed period. The bank estimates a potential monthly difference of more than ₹7,900 and a cumulative difference of around ₹3.46 lakh over the period.
For a ₹75 lakh loan, the corresponding EMI rises from ₹55,900 to more than ₹61,800 under the assumed floating-rate scenario, while the hybrid loan remains at ₹55,900 during the fixed period. The bank estimates a potential difference of more than ₹5,900 a month and around ₹2.59 lakh over the period.
These are illustrative figures, not guaranteed savings. The actual benefit will depend on how interest rates move during the fixed period and the terms applicable to the borrower.
What borrowers should keep in mind
The fixed-rate structure offers protection if interest rates rise during the chosen period, but it also means borrowers would not benefit from falling rates during that period. Once the fixed tenure ends, the loan becomes floating-rate and future EMIs can change with movements in the repo rate and the applicable spread.
The product therefore gives borrowers greater certainty over EMIs for a defined period, rather than removing interest-rate risk over the entire loan tenure.
