A loan or mortgage with a predetermined interest rate that does not change for the entire term of the loan is known as a fixed interest rate. The fundamental component of any loan is interest rate of which fixed interest rate is very important. In this interest rate one pays the same amount of interest throughout the entire tenure of the loan.

One important characteristic feature of this interest rate is that it is not subject to changes that occur in market conditions. Although it may sometimes be higher than market rate it proves to be a very stable option in case of monthly payments. This is usually applicable in cases where the tenure period of the loan is very long. It is very well matched to people with low and varying monthly incomes.