What causes an adjustable rate mortgage to adjust?
The interest rate of an adjustable rate mortgage (ARM) is linked to a particular index of economic conditions. An index frequently used by Home123 is the six-month London Interbank Offering Rate or LIBOR. This index is the average of interest rates charged by major international banks to borrow U.S. dollars in the London money market. LIBOR is the British equivalent to the U.S. Prime Rate.
The interest rate of an adjustable rate mortgage (ARM) is linked to a particular index of economic conditions. A commonly used index is the six-month London Interbank Offering Rate or LIBOR. This index is the average of interest rates charged by major international banks to borrow U.S. dollars in the London money market. LIBOR is the British equivalent to the U.S. Prime Rate.
