Wait, isn't your number 1 the exact opposite, unless you got a variable rate mortgage? If you got a fixed rate mortgage, inflation is your friend, since inflation will decrease your debt.
This Quora answer indicates that FHA loans alone alone make up a majority of new home loans in the US: https://www.quora.com/What-percentage-of-US-home-loans-are-f...
Say you've got a 5 year fixed mortgage, at 3.49%. You buy a new home, taking a $500k mortgage at 25y amortization. That's $2494/mo. At the end of the mortgage, you'll have $431,321 remaining on the loan.
Renewing, if you find the fixed-rate amount is up two points to 5.49%, your 20 remaining years now costs you $2950/mo. If you're taking a mortgage right at the edge of your expense threshold, that 20% jump in monthly payments can hurt.
The alternative is another 25y amortization for $2630/mo (and hey, inflation means you should be clear to $2730/mo to match your first mortgage) but that's just prolonging the life of the loan.
It seems like you're describing a https://en.wikipedia.org/wiki/Balloon_payment_mortgage, where you pay a fixed (or perhaps variable?) rate for a few years, but then need to make a huge balloon payment on that mortgage at the end of the term (usually done by arranging a separate mortgage).
Fixed rate means the interest rate doesn't change over the term of the loan. Compare this to variable or floating rates that can change.
The difference for the US is that the fixed rates are for a 30 year term. Countries like Canada and Australia have 10 year terms as a max, with most people electing for something shorter as the rate goes down.
In the US your rate might never change. In other countries it changes when you refinance at the end of the term.
Let's say you refinance from 2% to 6% and your mortgage payment exceed loan to income ratios, you might have to sell your home.