Fixed Rate

A fixed rate is an interest rate that is locked in for a specified period or for the entire term of a loan. Monthly repayments remain the same throughout the fixed period, providing certainty and protection against rate increases. Fixed rates are common on personal loans, commercial mortgages, and some term business loans.

Fixed rates are typically set at a premium to the equivalent variable rate at the time of borrowing - you pay for the certainty of knowing your rate will not change. If market rates rise during your term, your fixed rate becomes advantageous. If they fall, you pay more than the current market rate.

Early repayment charges (ERCs) are commonly associated with fixed-rate products, as lenders need to protect against the cost of borrowers exiting when rates fall. For businesses that value certainty and plan to hold a loan to maturity, fixed rates are usually preferable. For those who may repay early or need flexibility, the cost of ERCs should be considered.

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