Another traditional theory of the term structure asserts that lenders prefer to lend short-term to avoid tying up funds for long periods of time. In other words, they have a preference for shorter maturities. At the same time, borrowers prefer to borrow long-term to lock in secure financing for long periods of time.
According to the maturity preference theory, then, borrowers have to pay a higher rate to borrow long term rather than short term to essentially bribe lenders into loaning funds for longer maturities. The extra interest is called a maturity premium.
The Fisher hypothesis, maturity preference theory, and expectations theory can coexist without problem. For example, suppose the shape of a yield curve is basically determined by expected future interest rates according to expectations theory. But where do expected future interest rates come from? According to the Fisher hypothesis, expectations regarding future interest rates are based
on expected future rates of inflation. Thus expectations theory and the Fisher hypothesis mesh quite nicely.
Furthermore, a basic yield curve determined by inflationary expectations could also accommodate maturity preference theory. All we need to do is add a maturity premium to longer term interest rates. In this view, long-term, default-free interest rates have three components, a real rate, an anticipated future inflation rate, and a maturity premium.