Fixed and variable rate
A fixed rate stays the same for an agreed period; a variable rate can change while you owe the money.
A fixed rate means the payment is known for the fixed period. A variable rate moves — usually with a central bank rate or the lender’s own decisions — so the payment can rise or fall.
Fixed is not automatically safer. It is certainty bought at a price, usually a slightly higher starting rate, and it ends: what happens at the end of the fixed period matters as much as the rate during it.
The useful question is not which is cheaper today but what happens to you if rates rise substantially. If the answer is “I could not pay”, certainty is worth paying for regardless of the comparison.
Related terms
Covered properly in Learn.