Floating vs Fixed Rate Home Loan in Nepal: The Choice When NRB Base Rate Halved
Base rate dropped from 7.35% to 5.6% in a year. Floating now sits at 5.73% to 8.77%; fixed at 6.99% to 9.99%. The break-even math and which to pick.
A relative bought a Rs 1.6 crore flat in Imadol in late 2022 with an 80% home loan at 12.4% floating. His EMI was Rs 1.43 lakh on a 20-year tenure. The bank reset to 13.21% in February 2023. His EMI moved to Rs 1.50 lakh. By end-2023, his salary had grown 7% but his EMI was 5% higher and his groceries were 9% higher. He stopped his CIT top-up. He cancelled his daughter's piano lessons. He started taking on weekend consulting work to plug the gap.
In May 2026 his bank reset his EMI again. New rate: 8.6%. New EMI: Rs 1.13 lakh. He has Rs 37,000 a month back in his budget that disappeared three years ago. The piano lessons resumed. He learned the lesson the hard way that the headline rate at signing is not what you actually pay over a 20-year mortgage in Nepal. Floating means floating both directions.
What the base rate is and why it matters
NRB does not directly set home loan rates. It sets a corridor — policy rate (repo), bank rate, and deposit-collection rate — and then NRB-licensed banks compute their own base rate quarterly. Every floating loan in Nepal is priced as Base Rate + Premium (Spread). When the base rate moves, every floating-rate borrower's EMI moves with it on the next quarterly reset.
NRB Monetary Policy FY 2082/83 (released 11 July 2025) cut:
| Rate | FY 2081/82 | FY 2082/83 |
|---|---|---|
| Policy / repo rate | 5.0% | 4.5% |
| Bank rate | 6.5% | 6.0% |
| Deposit-collection rate | 3.0% | 2.75% |
The transmission shows up in base rates with a one-quarter lag. The trajectory:
| Period | Average commercial bank base rate |
|---|---|
| Shrawan 2081 (mid-July 2024) | 8.13% |
| Ashwin 2081 (mid-Oct 2024) | 7.35% |
| Shrawan 2082 (mid-July 2025) | 6.11% |
| Bhadau 2082 (mid-Aug 2025) | 5.78% |
| Ashwin 2082 (mid-Oct 2025) | 5.60% |
A 2.55 percentage-point fall in 12 months. Translated into a typical home loan with a 2% spread, that is roughly 9.4% → 7.6% on a floating rate — about Rs 9,000/month off the EMI on a Rs 80 lakh, 20-year loan.
Where each bank's base rate sits today
Class A commercial banks at end-Ashwin 2082:
| Bank | Base rate (Ashwin 2082) | Base rate (Ashwin 2081) |
|---|---|---|
| Standard Chartered | 4.27% | 5.71% |
| Rastriya Banijya Bank | 4.54% | 6.05% |
| Global IME | 5.40% | 7.29% |
| NIMB | 5.56% | 7.28% |
| Nabil | 5.58% | 7.02% |
| Prabhu | 5.68% | 7.65% |
| NMB | 5.89% | 7.49% |
| Siddhartha | 5.90% | 7.58% |
| Citizens | 5.90% | 7.92% |
| Himalayan | 6.08% | 8.35% |
| NIC Asia | 6.60% | 8.37% |
Standard Chartered's base rate is consistently the lowest in the system. Their funding cost is dominated by current accounts and FCY deposits, which are cheaper than the term deposits that drive smaller banks' base rate. The spread between SCB at 4.27% and NIC Asia at 6.60% is 233 basis points. On a Rs 1 crore loan, that compounds to Rs 23 lakh in total interest over 20 years before any premium difference.
Home loan rates in May 2026
Combining base rate plus premium, the major Class A home loan rates:
| Bank | Floating range | Fixed option | Max loan |
|---|---|---|---|
| Nabil | 5.73% to 7.73% | 8.99% (7 years) | Rs 3 crore |
| NMB | 6.08% to 8.08% | 9.99% (10 years) | Rs 3 crore |
| Standard Chartered | 6.27% to 8.27% | 6.99% (7 years) | Rs 3 crore |
| Rastriya Banijya | 6.48% to 6.98% | 9.25% (5 years) | Rs 3 crore |
| Global IME | 6.74% to 8.74% | 8.99% to 10.99% (10 years) | Rs 3 crore |
| NIC Asia (Saathi Ghar Karja) | 6.77% to 8.77% | 6.99% (7 years) | Rs 10 crore |
Two notable products at 6.99% fixed for 7 years: Standard Chartered's variable-then-fixed product and NIC Asia's Saathi Ghar Karja (launched 13 February 2026). Both target first-time buyers, both offer 80% LTV for first homes and 70% otherwise.
NIC Asia Saathi is the most aggressive product in the market right now. Eligibility: first home, property up to 3,000 sq ft, loan size Rs 25 lakh to Rs 10 crore, age plus tenure capped at 70 years. The 6.99% rate is fixed for 7 years; the loan then converts to floating at the prevailing Base Rate + 2% to 2.5% spread.
What "fixed" actually means in Nepal
A true 20-year fixed home loan does not exist in Nepal. The reason is structural: Nepali banks fund themselves with short-tenor deposits (1 to 5 years) and cannot reliably lock in their own funding cost for 20 years. Every loan marketed as fixed in the Nepali market is actually a 5, 7, or 10-year fixed period followed by automatic conversion to floating for the remaining tenure.
The implications for a borrower:
| Loan structure | Years 1–7 | Years 8–20 |
|---|---|---|
| Pure floating | Resets quarterly with base rate | Continues to reset quarterly |
| 7-year fixed (e.g., NIC Asia Saathi) | Locked at 6.99% | Floating at then-prevailing Base + spread |
| 5-year fixed (e.g., SCB, RBB) | Locked at 8.25% to 9.25% | Floating |
| 10-year fixed (e.g., NMB, Global IME) | Locked at 8.99% to 10.99% | Floating |
The longer the fixed period, the higher the rate. A 7-year fixed at 6.99% beats current floating at any premium above 1.4 percentage points. A 10-year fixed at 9.99% only makes sense if you believe floating rates will average above 8% for the full decade — possible, but a 5-percentage-point spread is rare.
For the EMI math itself, the home loan EMI math post covers the calculation step by step.
Worked example: Rs 75 lakh, 20 years
For a typical first-time buyer scenario — Rs 75 lakh loan, 20-year tenure — three options:
| Option | Year 1 rate | Year 1 EMI | Total interest if rate stays constant |
|---|---|---|---|
| Floating at 7.00% (today's floor) | 7.00% | Rs 58,150 | Rs 64.6 lakh |
| 7-year fixed at 6.99% | 6.99% | Rs 58,103 | Rs 64.5 lakh (years 1–7) |
| 10-year fixed at 9.99% | 9.99% | Rs 72,251 | Rs 98.4 lakh (years 1–10) |
If the base rate doubles back to its 2022 peak (effective floating at ~12.5%), the floating EMI moves to roughly Rs 85,000. That is a Rs 27,000/month swing on a household budget that planned around Rs 58,000.
The break-even logic: take the 7-year fixed at 6.99% if you believe rates will average above 7.0% over the next 7 years. Take floating if you believe rates will stay below 7.0% — or if you plan to prepay the loan within 4 years (the prepay savings exceed any fixed-rate protection).
This is the standard analytical frame globally. The Nepal-specific complication is that the 2022/23 cycle showed Nepali floating rates can swing 5+ percentage points in 24 months. Historical volatility is higher than the regulator's stated comfort.
The 2022/23 stress test (worth remembering)
The 18 months from October 2021 to February 2023 are the closest thing Nepal has had to a real stress test for floating-rate home loans. The data:
- Average lending rate jumped from 8.43% (mid-2021) to 11.62% (mid-July 2022) to a peak of 13.03% in FY 2022/23.
- Mortgage-credit interest rate hit 13.21% in February 2023.
- Property transactions fell 56% during FY 2022/23.
- Government revenue from real estate dropped from Rs 57.66 billion to Rs 41.15 billion.
- Banking-sector NPLs rose from 1.3% (June 2022) to 3.0% (August 2023).
- Nepal Bankers Association capped loan premium at 5% (from 6%) effective 15 March 2023 in a regulatory attempt to relieve borrower stress.
The IMF Article IV report from that period flagged "eroded repayment capacity" across Nepali households, directly attributable to the rate jump. For a Rs 1.5 crore loan at 80% LTV, the floating EMI rose from roughly Rs 1.1 lakh (at 9% rate) to Rs 1.43 lakh (at 13% rate) in 18 months — a 30% jump on a household budget that had built around the original number.
This is the scenario fixed-rate insurance buys you out of. Whether it is worth the premium depends on the rate gap and your view of NRB policy direction.
NRB rules that constrain the loan size
NRB Unified Directives in force as of May 2026:
- Loan ceiling. Rs 3 crore for private residential (raised from Rs 2 crore in July 2025).
- LTV. 80% for first-time buyers, 70% for repeat buyers, on properties up to 3,000 sq ft. Other private residential at 70% (raised from 60%). Non-residential real estate at 50%.
- DSR. 50% standard; 70% for home or land purchase with full tax clearance.
- Maximum tenure. 30 years; age plus tenure capped at 70 (so a 45-year-old borrower gets a maximum 25-year tenure).
- Single Obligor Limit. Removed in Unified Directives 2082, giving banks more flexibility on large exposures.
The 80% LTV cap means on a Rs 1 crore property, the maximum loan is Rs 80 lakh and the buyer needs Rs 20 lakh in margin. On the larger Rs 3 crore ceiling, the buyer needs Rs 60 lakh in margin plus stamp duty, registration, valuation, and insurance fees that stack another 5% to 7% on top.
The friction stack: what you pay beyond the loan
Six fee lines that erode the loan amount before it ever lands as a property purchase:
| Item | Typical % or range | On a Rs 1 crore property |
|---|---|---|
| Loan processing fee | 0.5% to 1% | Rs 40,000 to Rs 80,000 |
| Property valuation | Rs 7,500 to Rs 50,000+ | Rs 25,000 typical |
| Property insurance (fire + earthquake) | 0.1% to 0.3%/year | Rs 10,000 to Rs 30,000/year |
| Credit-life insurance | 0.5% to 1% upfront | Rs 40,000 to Rs 80,000 |
| Stamp duty + registration | 4% to 5% | Rs 4 to 5 lakh |
| Bagmati Sabhyata Kosh (Kathmandu Valley) | 5% surcharge on registration | Rs 20,000 to Rs 25,000 |
Women buyers get a 25% to 30% concession on registration fees, which is the single biggest lever in the Kathmandu Valley registration math. The property registration costs post walks through the malpot stack in full detail.
Total friction on a Rs 1 crore property purchase: roughly Rs 6 to Rs 8 lakh of one-time costs plus Rs 10,000 to Rs 30,000 of recurring insurance. Plan for these in cash; they cannot be financed into the loan.
The decision framework
Five questions in order:
- What is your view on NRB policy direction over the next 5 to 7 years? If you believe rates will rise from here (more likely given the current floor), lock fixed. If you believe rates will stay at the floor (possible but less likely), take floating.
- How long do you actually plan to hold this loan? If you expect to prepay within 4 years (selling, refinancing, or large bonus income), floating dominates. If you plan to ride the full 20 years, fixed insurance is worth more.
- How tight is your EMI affordability at the floor rate? If your EMI at 7% is already 45% of monthly income, you cannot afford a swing back to 11%. Take fixed.
- Which bank is offering the best fixed-period product? NIC Asia Saathi at 6.99% fixed for 7 years is the most aggressive in the May 2026 market. Standard Chartered's 7-year fixed at 6.99% is the comparable alternative.
- What is your collateral structure? If you can hand the bank a Rs 2 crore property for a Rs 1 crore loan, you have negotiating room on the premium. Bring competing offers to the relationship manager.
A reasonable default for a first-time buyer in mid-to-late 2026: NIC Asia Saathi or SCB at 6.99% fixed for 7 years on the front half of the loan. Prepay aggressively in the first 7 years if salary growth permits. The loan converts to floating in year 8 with much lower principal outstanding, blunting future rate-shock risk.
For framing on whether to buy at all, the renting vs buying in Kathmandu post is the precondition read. For the broader context on your CIB exposure if anything goes sideways, the CIB blacklist post is the defensive read.
What you actually need to know
- The Nepali home loan market in May 2026 sits at the bottom of a rate cycle. Base rate has halved in 12 months. The next move is likely up.
- Floating rates run 5.73% to 8.77% across major banks. Fixed rates run 6.99% to 9.99%. The 6.99% fixed for 7 years at NIC Asia Saathi and SCB is the standout product right now.
- No true 20-year fixed exists in Nepal. Every fixed product converts to floating after 5, 7, or 10 years.
- The 2022/23 cycle saw floating rates swing 5 percentage points in 18 months. A 30%+ EMI jump on a home loan is the proven Nepali downside scenario; it is not theoretical.
- The NRB LTV cap is 80% for first-time buyers. Plan Rs 6 to Rs 8 lakh of cash friction on every Rs 1 crore of property purchased, on top of the down payment.
If you are weighing a specific home loan offer or trying to decide between fixed and floating on a sanctioned application, email me at parjanya57@gmail.com with the loan amount, the floating and fixed rate options, and your salary band. I cannot tell you which direction NRB will move next, but I can usually walk you through the break-even rate at which your fixed-rate insurance starts paying for itself.
This post is part of the Nepal Money Basics guide — the Big-Ticket Decisions section.