Okuzeka
Finance & Banking vocabulary · Interest & Exchange Rates

Variable rate

Meaning in finance & banking, with examples

nounCore term

In finance & banking, variable rate means: An interest rate that can go up or down during a loan or deposit term, usually because it follows a benchmark rate.

In Turkish: değişken faiz, değişken oran

How it is used

Also called a floating rate, or an adjustable rate for US mortgages. It is usually a benchmark plus a margin, such as SOFR or EURIBOR plus 2%. When the benchmark rises, the borrower's payments rise too.

Example sentences

  1. With a variable rate, your monthly payment may change every three months.

  2. The loan has a variable rate of EURIBOR plus 2.5 percent.

Common collocations

  • variable-rate loan
  • floating rate
  • variable-rate mortgage
  • benchmark plus margin
  • fixed rateAn interest rate that stays the same for the whole loan or deposit term, or for an agreed period, so the payments do not change.
  • interest rateThe price of borrowing money, shown as a percentage of the amount borrowed or saved for a period, usually one year.
  • basis pointOne hundredth of one percentage point (0.01%). It is used to describe small changes in interest rates and yields precisely.
  • market riskThe risk of losses caused by changes in market prices, such as interest rates, exchange rates, share prices and commodity prices.

More terms: Interest & Exchange Rates

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This page explains English vocabulary for learners. It is not financial advice.