3-year variable mortgage rates are also called adjustable mortgage rates. Should you opt for a mortgage of 3 years, your lender will set an interest rate that varies according to the Prime Lending Rate. This prime rate is the interest rate that banks offer their creditworthy customers when giving loans. Your lender will fix a discount (deductible) or premium (added) rate on the prime rate.
For instance, if the prime lending rate is 4%, the variable rates can be either 3.5% (discount) or 4.5% (premium). This program protects you against any drastic changes in the interest rates during the 3-year period. Typically, you can expect to pay lower rates of interest in the variable mortgage rate program as compared to the fixed rate mortgage program. That's because you'll pay a fixed rate of interest irrespective of the varying prime lending rates of the variable mortgage.