Index Rate

Definition: An index rate is computed monthly and is the basis for many adjustable loan payment computations. Adjustable mortgage payments are made up of a margin rate plus an index rate. Index rates are a measurement of financial markets and based on the averages of various financial instruments such as treasury bills, COSI, COFI and LIBOR. To fully understand a particular index, consumers should ask for a long-term history and study the movements to determine safety and risk.