fixedrate

Fixed rate is an interest rate that remains constant for a specified term of a loan, bond, or deposit, regardless of movements in market rates. The rate is determined at origination or issuance and is not altered during the fixed period. Fixed rates contrast with variable or floating rates, which are tied to a benchmark such as a central bank rate or an index and can change over time.

Common applications include fixed-rate mortgages or loans, fixed-rate bonds, and fixed-rate savings or time deposit accounts. In a fixed-rate mortgage, monthly payments remain unchanged for the term (for example, 15 or 30 years). In fixed-rate bonds, the issuer pays a fixed coupon, and the principal is repaid at maturity. Fixed-rate deposits offer a guaranteed return for a set period, subject to early withdrawal penalties.

Advantages include predictable payments and protection against rising rates, aiding budgeting and financial planning. Disadvantages include potentially higher initial rates than prevailing market rates, limited benefit if rates fall, and, in some products, reduced liquidity or prepayment penalties.

Lenders take on interest-rate risk when offering fixed rates, while borrowers forfeit the option to benefit from falling rates during the fixed period. Some products are fixed for a term and then switch to a variable rate (hybrid products). Fixed rates are widely used by households and institutions to manage interest-rate exposure and to match cash-flow needs with funding.