Fixedinterest

Fixedinterest (often written as fixed interest or fixed-rate interest) refers to an interest rate or portion of interest that remains unchanged for a defined period. In finance, fixed-interest means that the rate attached to a loan, bond, or other investment is set at a predetermined level for the term, insulating the holder from short-term market fluctuations.

Common implementations include fixed-rate mortgages, fixed-rate bonds, fixed annuities, and certificates of deposit. These instruments provide payment stability, assist budgeting, and are used by borrowers seeking predictable payments and by investors seeking predictable income.

How it works varies by instrument. In an amortizing loan with a fixed rate, monthly payments are typically constant, with the interest portion shrinking as principal is repaid. In a fixed-rate bond, the issuer pays a fixed coupon at regular intervals until maturity, with the principal returned at the end. In a fixed deposit or term deposit, the depositor earns a fixed rate for the term, often with penalties for early withdrawal. If market rates rise, fixed-interest holders may miss higher returns; if rates fall, they may be locked into lower yields.

Limitations and risks include opportunity cost, inflation risk, credit risk, and liquidity risk. Fixed-interest products can underperform in rising inflation or changing monetary policy, and some instruments impose penalties for early withdrawal or have limited liquidity.