Mortgage loan, a quick primer
This slightly higher interest rate is a premium you pay for the security of a fixed rate. On the other hand, the interest rate for adjustable rate mortgages "adjusts" as national interest rates rise and fall. When the prime rate is high, your mortgage interest rate increases; when the prime rate is low, your mortgage rate drops. Your monthly payments rise and fall accordingly. Because banks take on less risk when they issue adjustable rate loans, they offer slightly lower interest rates for adjustable rate loans than for fixed rate loans.