In the context of fixed versus variable mortgage rates, fixing the rate for five years when subsequent rates rise typically results in what outcome for the borrower?

• A. The borrower saved money during the fixed period.
• B. The borrower paid more than necessary.
• C. No financial impact.
• D. The borrower avoided any risk.

Answer: (A)

Fixing the rate locks in a payment amount for a defined period, so you’re insulated from changes in market rates during that time. When market rates rise after you’ve locked in a five-year fixed, your payments remain at the lower fixed rate, meaning you pay less than new borrowers would at the higher current rates. So you end up saving money during the fixed period. After the term ends, payments could rise if rates stay high, but the benefit during that five-year window is the savings achieved relative to the higher rates newcomers face.