What is the published interest rate used to adjust the note rate of an ARM called?

The published interest rate that is used to adjust the note rate of an Adjustable Rate Mortgage (ARM) is referred to as the index. The index is a benchmark interest rate that reflects the current state of the economy and is often tied to a specific market indicator, such as the yield on U.S. Treasury securities or the London Interbank Offered Rate (LIBOR).

When the index rises or falls, the interest rate on the ARM adjusts accordingly. This mechanism allows the loan's rate to fluctuate based on prevailing market conditions, which can lead to lower costs when interest rates decrease, or higher costs when they increase. The connection between the index and the rate adjustments helps ensure that borrowers' loan payments adjust based on factors beyond the lender's control, promoting fairness in the terms of the loan.

The margin, on the other hand, is a fixed percentage added to the index rate to determine the final interest rate for the ARM, while the Annual Percentage Rate (APR) represents the total cost of borrowing, including interest and other fees, over the term of the loan. The discount rate typically refers to the interest rate charged by central banks on loans they give to commercial banks and is not specific to ARMs. Thus, identifying the index is crucial in understanding