Variable rate mortgages are not assigned a locked in interest rate, but rather, the rate of interest changes according to market conditions. The rate of variable rate mortgages generally changes whenever there is a change in the prime lending rate. The rate used in variable rate mortgages generally tracks the 5-year mortgage rates which are normally higher than the short-term rates. Usually, your payments will stay the same throughout the term of your mortgage but as the rate changes more or less of the mortgage payment amount will be attributed to interest charges. So if interest rates go down, you will pay off your mortgage sooner, if interest rates rise it will take longer to pay off your mortgage.
Variable rate mortgages can be either open (you can pay them off at any time) or closed (you cannot pay them off without a penalty).
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