Which party typically bears the interest rate risk in a level-payment mortgage if interest rates rise?

In a level-payment mortgage, the borrower makes consistent monthly payments that cover both principal and interest over the life of the loan. When interest rates rise, the lender is the party that typically bears the interest rate risk. This is because the lender has locked in a lower interest rate for the duration of the mortgage when they originated the loan.

If market interest rates increase after the loan is issued, the lender misses out on the opportunity to issue new loans at the higher rates, which could result in a loss of potential interest income compared to their existing loan portfolio. The borrower, on the other hand, benefits from the fixed rate they locked in, as their payments do not change despite fluctuations in market rates. This situation places the burden of interest rate risk solely on the lender in a level-payment mortgage scenario.