Variable Rates
Rates that are tied to the prime lending rate or Treasury Bill rate are called variable rates, because they vary depending on the economy and subsequent interest rate moves by the Federal Reserve.
The interest rate a bank or mortgage lender charges you for a line of credit or loan is tied to the prime rate, which it can’t control. What the lender can control, however, is the formula by which it determines the interest rates it will charge or pay out to its customers-generally adding a certain number of percentage points to the prime rate.