What is a Fixed Rate Mortgage?

A Fixed Rate Mortgage is defined as a mortgage that has a constant interest rate throughout its term. This means that the interest rate does not change, providing borrowers with predictable monthly payments for the entire duration of the loan, which can range typically from 15 to 30 years. The stability of the fixed interest rate provides certainty for budgeting and financial planning, as borrowers won't be impacted by fluctuations in market interest rates over time.

This type of mortgage contrasts significantly with variable rate options, where the interest rate can change based on market conditions, leading to potential increases in future payments. Additionally, fixed rate mortgages are distinctly different from other lending arrangements such as those requiring lump sum repayments or annual adjustments in interest rates, which can introduce complexity and unpredictability in payment structures.