Linked with the current prime rate (which is subject to fluctuation), variable rates may either increase or decrease during the term of the mortgage. Your lender will either provide you with a premium rate or discount rate. A premium rate will be prime plus a set amount; alternatively, a discount rate will be prime minus a set amount. For instance, the current prime rate is 3%. If your lender provides you with a discount rate of 0.40%, your variable rate will be 2.6%, which may be lower than the current fixed rate. Due to the fluctuating nature of the prime rate, the borrower must be comfortable with some risk.