Definition
An artificially low introductory interest rate that lures borrowers into adjustable-rate mortgages before jumping to its true, painful level. It's the 'free trial' of the mortgage world, and the subscription auto-renews at triple the price.
Example Usage
That 2.5% teaser rate looks amazing, but it adjusts to prime plus 3% after two years—make sure you can afford the real rate.
Origin
Mortgage industry marketing terminology that became infamous during the subprime mortgage crisis of 2007-2008
Fun Fact
Teaser rates were a major contributor to the 2008 financial crisis, as borrowers who could afford initial payments defaulted when rates reset to unaffordable levels.
Source: Mortgage lending terminology
Related Terms
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See “teaser rate” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.
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