On an adjustable-rate mortgage, which component is set by the lender and remains fixed for the entire life of the loan?

Correct answer: The margin

The margin is a fixed percentage set by the lender that stays constant throughout the life of the ARM. The index, by contrast, floats with market conditions. The fully indexed rate equals the margin plus the index and therefore changes when the index changes. A teaser rate is a temporarily reduced introductory rate, not a permanent component.