Definition of fixed rate (loan)

type of loan in which the interest rate does not fluctuate with general market conditions. There are fixed rate mortgage (also known as conventional mortgage) and consumer installment loans, as well as fixed rate business loans. Fixed rate loans tend to have higher original interest rates than flexible rate loans such as an Adjustable Rate Mortgage (ARM), because lenders are not protected against a rise in the cost of money when they make a fixed rate loan.

The term fixed rate may also refer to fixed currency exchange rates.