Definition
A fixed rate is an interest rate that is expected to remain the same for a set period of time.
Analysis
Fixed rates may not necessarily be free from adjustment. The terms of the account or contract will dictate whether a fixed rate is permanent.
Credit cards that have a fixed interest rate may still be subject to interest rate fluctuations. Additionally, a creditor reserves the right to increase the rate to compensate for increased risk factors. Whereas a credit card with a variable rate may see interest rate fluctuations every couple of months, a fixed rate credit card normally experiences interest rate changes less frequently, such as every 6-8 months. Fixed rates on credit cards are not permanent.
Conventional mortgage loans have a fixed interest rate that will not change for the life of the loan. Even if mortgage market rates rise or lower by several percentage points, an existing fixed rate mortgage will not experience rate fluctuations.
An adjustable rate mortgage, however will experience interest rate resets. These are actually a type of variable rate loan.
Conventional mortgages and other normal installment loans are characterized by fixed payments on a fixed rate loan. The rates will not change for the life of the loan, even if payments are missed or late.
