Locked-In Interest Rate

DEFINITION of 'Locked-In Interest Rate'

Referring to a loan where the borrower and lender agree on a constant rate for a specified period. The lending institution promises to charge this locked in rate as a legal commitment. Sometimes there are certain qualifications or exceptions which, if not met over the life of the loan, will allow the lender to charge a higher rate.

Also known as a "fixed rate."

BREAKING DOWN 'Locked-In Interest Rate'

A borrower would want to lock in their interest rate if they believe the rate will increase over the life of the loan. Interest rates will fluctuate over time and for mortgages based on the five and ten year Treasury Note Yields. Higher demand for these notes will result in lower interest rates. A floating rate loan is the opposite of a fixed or locked-in rate.