Prime Rate
The prime rate is a reference rate set by lenders and commonly used to price variable-rate mortgages, lines of credit, and other loans. Variable mortgage rates are often quoted as prime plus or minus a percentage.
When prime rises or falls, the interest rate on many variable mortgages changes accordingly. Depending on the mortgage type, this can change the payment amount or change how much of each payment goes to interest versus principal.
Why this matters:
Variable-rate borrowers often track prime because it directly affects cost. Understanding how prime impacts your mortgage helps you plan for payment changes and avoid surprises.
Related Mortgage Terms
Often confused with:
Interest Rate — Prime is a benchmark; your mortgage rate is what you actually pay.
Closely related:
Variable-Rate Mortgage — Often expressed as “prime plus/minus.”
Adjustable-Rate Mortgage — Commonly moves with prime changes.
Next step:
Variable-Rate Mortgage — See how prime affects real payments and risk