What best determines whether a borrower’s interest rate on an adjustable-rate loan goes up or down? A. A fixed interest rate
B. A bank’s finances
C. A market’s condition
D. A person’s finances
What best determines whether a borrower’s interest rate on an adjustable-rate loan goes up or down?
Share
The correct answer is C. A market’s condition.
Adjustable-rate loans typically have interest rates that fluctuate based on changes in the overall market conditions, often linked to indexes or benchmarks like the LIBOR or the prime rate. When market interest rates rise, the borrower’s rate may also increase, and when they fall, the borrower’s rate may decrease. This is different from a fixed interest rate, which remains constant regardless of market conditions.