What type of mortgage allows the interest to fluctuate with the market?

A variable-rate mortgage, also known as an adjustable-rate mortgage (ARM), allows the interest rate to fluctuate based on changes in a corresponding market index. This means that as the interest rates in the broader financial market rise or fall, the interest rate on the mortgage can adjust accordingly, typically at predetermined intervals. This kind of mortgage often starts with a lower initial rate compared to a fixed-rate mortgage, making it attractive to borrowers looking for lower initial payments. Over time, however, if market rates increase, so too can the payments, which adds a level of uncertainty compared to fixed-rate mortgages, where the interest rate and payments remain constant throughout the loan term.

The other types of mortgages mentioned do not have this feature of fluctuating interest rates. For instance, a fixed-rate mortgage maintains the same interest rate for the entirety of its term, offering predictability and stability in monthly payments. A discount mortgage often involves a loan that is sold at a lower price than face value or includes provisions for upfront fees, which do not involve fluctuating rates. The term "gold standard mortgage" does not correspond with a recognized category of mortgages in standard finance terminology.