What is a 'Fixed Interest Rate'
A fixed interest rate is an interest rate on a liability, such as a loan or mortgage, that remains fixed either for the entire term of the loan or for part of this term. A fixed interest rate may be attractive to a borrower who feels that the interest rate might rise over the term of the loan, which would increase his or her interest expense. A fixed interest rate, therefore, avoids the interest rate risk that comes with a floating or variable interest rate, wherein the interest rate payable on a debt obligation depends on a benchmark interest rate or index.
BREAKING DOWN 'Fixed Interest Rate'
While a home buyer in the United States can obtain a mortgage with a fixed interest rate for the full 30year term of his or her mortgage, in Canada, a home buyer can only "lock in" or obtain a fixed interest rate for a maximum of five to seven years of a 25year mortgage.
Borrowers are more likely to opt for fixed interest rates during periods of low interest rates, since the opportunity cost, if interest rates go lower, is still much less than during periods of high interest rates.

Variable Rate Mortgage
A type of home loan in which the interest rate is not fixed. ... 
Floating Interest Rate
An interest rate that is allowed to move up and down with the ... 
Variable Interest Rate
An interest rate on a loan or security that fluctuates over time, ... 
Lock Period
A number of days, often 30 or 60, during which the interest rate ... 
Capped Rate
An interest rate that is allowed to fluctuate, but which cannot ... 
Mortgage
A debt instrument, secured by the collateral of specified real ...

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