What is the highest interest rate over the life of the variable rate loan that is quoted as "5% 2/7"?

The notation "5% 2/7" in the context of a variable rate loan indicates that the loan begins with an interest rate of 5%, but it also specifies that the rate can increase over time. The "2/7" typically indicates that the maximum possible increase in the interest rate is up to an additional 2% above the initial rate, with the total upper limit being 7% above other components of the loan agreement, or the specified maximum rate itself.

In this case, the base rate is 5%, and when considering potential increases, the highest interest rate that could be charged on this loan would be reaching the specified maximum limit of 12%. Therefore, the highest interest rate over the life of the variable rate loan is indeed quoted as 12% APR, as indicated by the wording and typical structures of variable loans.

This understanding points to the significance of comprehending the terms of variable loans, which often have caps or limits that dictate how much the interest rate can increase.