Definition
A fixed-rate mortgage keeps the same interest rate for the whole loan. An adjustable-rate mortgage (ARM) has a rate that can change over time.
The story
Fixed-rate loans dominate the US mortgage market, according to Freddie Mac; with a fixed rate, the principal-and-interest payment never changes. An ARM (adjustable-rate mortgage) usually starts with a fixed rate for a set period, commonly 3, 5, 7 or 10 years, then adjusts with a market index, so payments can rise or fall.
Why markets watch it
When rates are high, more buyers consider ARMs, and when rates fall, many fixed-rate owners refinance.
Connects to
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