Adjustable rate

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Adjustable rate

Applies mainly to convertible securities. Refers to interest rate or dividend that is adjusted periodically, usually according to a standard market rate outside the control of the bank or savings institution, such as that prevailing on Treasury bonds or notes. Typically, such issues have a set floor or ceiling, called caps and collars that limits the adjustment.

Adjustable Rate

An interest rate on a loan or convertible security that changes periodically. For example, an adjustable rate mortgage has a certain interest rate that changes with varying frequency. The frequency of the change is called the adjustment rate. Usually, the adjustable rate is set according to some outside benchmark; for example, a loan might set the interest rate at LIBOR + 1%. An advantage of adjustable rate loans is the fact that one's interest rate might fall over time; this is a particular advantage if prevailing interest rates are high at the time of the loan. A disadvantage to adjustable rates is the uncertainty associated with them: one's payments on the loan generally rise or fall.
References in periodicals archive ?
The 10-year term loan carried an adjustable interest rate of 3.
To narrow the current account deficit and reduce inflation, the central bank has employed a policy mix since late 2010 based on daily liquidity injections, an adjustable interest rate corridor - the gap between the overnight borrowing and lending rates - and a low policy rate.
His recommendations include the reinstatement of usury laws to limit credit card and adjustable interest rate mortgages.
A family would need an annual income of $99,590 to buy it with 10 percent down, and an adjustable interest rate loan of 6.
The minimum household income first-time buyers needed to purchase a median-priced home at $478,710 in California in the third quarter of 2006 was $98,890, based on an adjustable interest rate of 6.
These folks are now confronting a quandary--even if they convert to a [low] fixable rate now, they'll pay a little more than they did with the adjustable interest rate," Kellner said.
The adjustable interest rate, a percentage point or two over prime, is charged only on the amount withdrawn a nice fit with remodeling's periodic, unpredictable cash needs.
Now any newly established home equity line with an adjustable interest rate must carry a rate ceiling.
CAR's First-time Buyer Housing Affordability Index based its findings on an adjustable interest rate of 6.
The financing was provided through a savings bank at a 75 percent loan-to-value ratio, with an adjustable interest rate starting at 5.
The minimum household income needed to purchase an entry-level home at $247,150 in California in the third quarter of 2009 was $43,500, based on an adjustable interest rate of 4.
Such cuts in short-term lending rates should lower borrowing costs for nearly anything with an adjustable interest rate or any type of rate tied to the Fed's rate, from credit cards to home loans.

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