Fixed Interest Rate
Quick Definition
An interest rate that stays the same for the entire loan term.
Full Explanation
A fixed interest rate remains constant for the entire duration of the loan term, providing predictable monthly payments regardless of changes to the prime rate or Bank of Canada policy. Fixed rates are popular in Canada during periods of rising interest rates because they protect borrowers from rate increases. The tradeoff is that fixed rates are typically slightly higher than variable rates at the time of borrowing, and breaking a fixed-rate mortgage early carries a higher penalty than variable-rate mortgages.
Related Terms
Variable Interest Rate
An interest rate that fluctuates based on the prime rate.
Interest Rate
The percentage charged on the principal loan balance per period.
Loan Term
The length of time you agree to specific loan conditions before renewal.
Prime Rate
The base lending rate banks use, tied to the Bank of Canada overnight rate.
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