A Fixed Rate Loan is a loan where the interest rate is guaranteed to remain the same during an initial term (years), regardless of what may occur in the market with variable rates.
Traditionally, lenders have offered terms of between 1 – 5 years for fixed rates, however some Lenders may offer terms of up to 10 years.
Fixed Rate term loans normally require the loan to be renegotiated at the conclusion of the fixed term, thus a five year fixed term loan would normally be required to be repaid in full at the end of year 5. However, most Lenders have the ability to arrange for the facility to revert to the Standard Variable Rate after the Fixed Rate term has expired. Therefore, a loan facility can be established for a 25 or 30 year loan term with the first five years, fixed at a specific interest rate.