Variable Rate
A variable (or adjustable) rate is an interest rate that can change over the life of a loan, usually tracking a benchmark rate set by the central bank. Payments start lower than fixed-rate equivalents but can rise significantly if rates climb. It shifts interest-rate risk from the lender to you.
Example
A 5/1 ARM might start at 5.5% for five years, then adjust annually — a jump to 7.5% would raise the payment on $300,000 by roughly $380 per month.