Glossary

Current Mortgage Rate - The interest rate currently being offered by a lending institution. The current mortgage rate varies over time and between regions, and is influenced chiefly by the actions of the Federal Reserve Board.

Basis Point - A basis point is one one-hundredth of a percent. For example, to say that the current mortgage rate went up 25 basis points, means it went up a quarter of a percent.

Federal Funds Rate - This is the rate for inter-bank loans between the Federal Reserve and member banks for overnight loans. The rate is set periodically by the Federal Reserve Board’s Federal Open Market Committee.

Federal Reserve Board (FRB) - This is the governmental body that is in charge of regulating the economy and stimulating economic growth, chiefly by controlling the direction of the interest rate.

Index Rate - This is the average of all mortgage interest rates offered by lenders at any given time. The Federal Housing Finance Board publishes an index to reflect national trends; regional indices are also published by several private organizations and lenders throughout the country.

Adjustable Rate Mortgage (ARM). - This is a type of mortgage with an interest rate that varies over time, tracking the current mortgage rate. An ARM typically offers a low introductory rate, and then the rate will change periodically, up or down, depending on the current rate.

Fixed Rate Mortgage. - A fixed rate mortgage is one with a single interest rate, which will stay the same over the lifetime of the loan.

Nonprime Lender - A lender who specializes in making mortgage loans, typically at a higher interest rate than the published index rate, to individuals with less than perfect credit.