Initial interest rate

The starting interest rate of an adjustable rate mortgage (ARM)

The initial interest rate on an ARM, sometimes called a teaser rate, is fixed for a certain period then adjusts to reflect overall market rates. The lender starts you off with a very low initial rate, planning that interest rates will rise in the future and adjust to market rates. Fixed rate loans, on the other hand always have the same interest rate for the life a loan, and the rate is usually higher than an ARM’s initial interest rate.

See: Adjustment date