The term fixed interest rate is used to describe any interest rates that do not fluctuate over time. Instead, they stay at the set rate for the entire duration of the finance agreement. The key benefit of this type of interest rate is that you know exactly how much you will be paying across the agreement.
In normal circumstances, lenders base their interest rates on the Bank of England’s base rates, where the lenders borrow their money from. This means that changes in the economy and financial market can lead to interest rates changing to match what’s going on in the UK as a whole. When lenders determine what a fixed interest rate will be, it is done based on the market rates available at the time of setting.
If you want to learn more about the different interest rates, you can read our full guide - All You Need To Know About Interest Rates.
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