As the name implies, this sort of loan allows a borrower to fix their interest rate for a set period of time. It's usually between 1 and 5 years, however some lenders will allow the clients to fix for up to 10 years. The benefits of this is that they have the peace of mind knowing exactly what their repayments are going to be month in and month out for the amount of time that they have fixed their loan for.

What happens when the fixed period expires? There are a couple of options. One is to renegotiate another fixed rate at the then current market rates, i.e., the new fixed rate will probably be different than the old fixed rate as the market will probably have fluctuated by this time. If a client chooses not to re-fix their interest rate, the loan will generally rollover (turn into) to the current standard variable rate product. 

A client can take a fixed rate loan, fixed for a set amount of time, over a specific period of time or term. For example, a client could take a four year fixed rate loan over a 25-year term. This means that the loan repayments for a P&I loan would be calculated at the interest rate that they fixed at, over the term of the loan. To look at it in slightly more depth, a loan taken at a fixed rate of say 7.85% for 4 years over a term of 10 years will have greater repayments than a loan fixed at the same rate for the same time taken over a term of 25 years.