What effect do high or low interest rates have on annuities?

Fixed annuity interest rates correlate to national interest rates when you sign the contract, so it's generally better to buy a fixed annuity when interest rates are high. Even though fixed-rate annuities generally lock in a pre-defined interest rate, this lock doesn't always work in your favor. If interest rates rise, you incur the opportunity cost of not earning more with another investment. Further, the amount of interest paid might not keep pace with inflation.