Tipping Point

Reset clause gives banks and HFCs the power to revise even their fixed-rate home loans

What is the reset clause in a home loan?
 
A reset clause gives banks and housing finance companies (HFCs) the power to revise even their fixed-rate home loans. Most home loan borrowers take floating-rate home loans, which are attractive in a falling rate scenario but can cause hardships when rates are rising. To avoid this, some conservative borrowers opt for a fixed-rate loan, which are typically more expensive than floating rate loans. Usually, it is a good idea to opt for fixed rate home loans when interest rates are close to the bottom, as is the case now.