Fixed Rate

A fixed rate means the interest rate on a loan or deposit does not change until maturity. The number agreed at signing holds to the end, so whatever happens to market rates, the interest you will pay or receive is already locked in.

The opposite is a floating rate, which is tied to a benchmark and resets every six or twelve months. Falling rates make it cheaper and rising rates make it painful. Choosing a fixed rate is therefore less about predicting rates and more about buying a payment that will not move.

The difference is tangible. On a $300,000 loan over 30 years, a move from 4% to 6% raises the monthly payment from about $1,430 to $1,800. That is $370 more every month, and for a household with steady income the uncertainty itself is the risk.

In exchange, fixed rates usually start a little higher than floating ones. Think of the gap as the price paid upfront for not being exposed to changes. So a fixed rate suits long repayment periods and tight monthly budgets, while a floating rate suits short horizons or a clear easing cycle. If you might switch later, check whether prepayment or conversion fees apply.