Any interest rate that changes on a periodic basis. The change is generally tied to movement of an outside indicator, such as the prime interest rate. Movement above or below certain levels is often prevented by a predetermined floor and ceiling for a given rate. In example, you might see a rate set at ""prime plus 2%"". This means that the rate on the loan will always be 2% higher than the prime rate, which changes regularly to take into account changes in the inflation rate. Also known as adjustable rate.