Definition
The term premium represents the additional return an investor demands for lending long-term rather than short-term, beyond expectations of future rates. It compensates for risks specific to long bonds: reinvestment risk, unexpected inflation risk, and liquidity risk.
In practice, the term premium varies over time: it is high when uncertainty about future inflation and rates is great (1980s-1990s), and low or negative when central banks buy bonds massively (post-2008 quantitative easing).
Impact on fixed mortgage rates: 5-year fixed rates incorporate expected short-term rates over 5 years PLUS the term premium. When the term premium is compressed (QE), fixed rates may seem abnormally low even if short rates don't move.