Fixed - A fixed loan is exactly what it says. Your interest rate is fixed for a period of time thus giving some people security against rate fluctuations and allows the borrower to know exactly what their repayments will be for any given time. This is for those people who prefer to know what their repayments will be for a set period of time. This can be from 1 year - 5 or some lenders 10 years. This loan reverts to the standard variable rate at end of fixed period unless you refix it. The pitfall with this is if the rates go down the borrower stays at the fixed rate until the end of the term. Early repayment of this loan could result in the borrower being penalised. If unsure about whether it is better to fix or not then you could always take a split loan. This allows you to take part variable and part fixed. Pitfalls of fixed rate is "fixed" means, fixed term, fixed loan amount, fixed repayments and most lenders only allow certain amounts per annum of extra repayments.