finance

index

In an adjustable-rate mortgage, the index is a published, market-based interest rate benchmark that the loan's rate follows. Common indexes include the Secured Overnight Financing Rate (SOFR) and U.S. Treasury yields. At each adjustment date, the lender adds a fixed margin to the current index value to set the new interest rate, subject to any rate caps. The lender cannot control the index, but the margin stays constant for the life of the loan.