Listen to a Business English Dialogue About Variable interest rate
Claire: Hi Ava, have you heard about variable interest rates?
Ava: Hi Claire! Yes, variable interest rates can change over time based on fluctuations in an underlying benchmark interest rate.
Claire: That’s right. They’re often used for loans like adjustable-rate mortgages, where the interest rate can go up or down depending on market conditions.
Ava: Exactly. Variable interest rates offer flexibility but also carry the risk of higher payments if the interest rate rises.
Claire: Yes, borrowers might benefit from lower initial rates, but they should be prepared for potential increases in the future.
Ava: Absolutely. It’s important for borrowers to understand the terms of their loan agreement and how changes in interest rates could affect their monthly payments.
Claire: Right. Lenders typically set variable interest rates based on factors like the prime rate or the London Interbank Offered Rate (LIBOR).
Ava: Yes, these rates serve as benchmarks for many types of loans and financial products, influencing the interest rates that borrowers pay.
Claire: That’s correct. Variable interest rates can offer opportunities for savings when rates are low but also present risks if rates rise unexpectedly.
Ava: Exactly. Borrowers should carefully consider their financial situation and risk tolerance before choosing a loan with a variable interest rate.
Claire: Yes, it’s important to weigh the potential benefits and drawbacks and to have a plan in place for managing potential changes in interest rates.
Ava: Absolutely. By staying informed and proactive, borrowers can make informed decisions and effectively manage their finances in a changing interest rate environment.