What is Fixed-Rate Mortgage?

A fixed-rate mortgage is a home loan with an interest rate that remains constant for the full term — typically 5, 10, 15, 25 or 30 years — providing predictable monthly payments and protection against rate rises.

Fixed rates trade certainty for cost: the borrower pays a premium over the variable rate (the term premium) to lock in payments. The longer the fix, the higher the premium, but the more insurance against rate volatility.

In Switzerland, 5-, 10- and 15-year fixed-rate mortgages dominate, often combined into a 'tranche' strategy spreading maturities to limit refinancing risk. US mortgages are heavily 30-year fixed — uniquely long because they are federally backed and prepayable without penalty.

Example

A borrower locks a CHF 800k mortgage at 2.5% fixed for 10 years; even if rates rise to 5%, monthly interest of about CHF 1,667 stays the same until the term ends.

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Related terms

Adjustable-Rate Mortgage (ARM)

An adjustable-rate mortgage has an interest rate that periodically adjusts based on a reference index plus a margin, often after an initial fixed-rate period — exposing the borrower to rate risk in exchange for a lower starting rate.

Refinance

Refinancing is the process of replacing an existing mortgage with a new one — typically to obtain a lower interest rate, change the loan term, switch between fixed and adjustable, or cash out equity.

Loan-to-Value (LTV)

Loan-to-value is the ratio of a mortgage loan to the appraised value of the property, expressed as a percentage, used by lenders to assess the risk of the loan.

Private Mortgage Insurance (PMI)

Private mortgage insurance is an insurance policy required by US lenders when a borrower puts down less than 20% on a conventional mortgage, protecting the lender (not the borrower) against default.

Frequently asked questions

Is a fixed rate always better?+

Not always — if rates fall, you stay locked at the higher rate or pay a prepayment penalty to refinance.

What term should I choose?+

Match the term to how long you plan to keep the loan and your appetite for rate risk.

Can I break a fixed-rate mortgage?+

Yes — but expect to pay a prepayment penalty (Vorfälligkeitsentschädigung) that can be substantial.