Interest Rate Floor

Interest rate floor

An interest rate agreement in which payments are made when the reference rate falls below the strike rate. Related: Interest rate cap.

Interest Rate Floor

The minimum interest rate that may be charged on a contract or agreement. For example, an adjustable-rate mortgage may have an interest rate floor stating that the rate will not go below 3.5% even if the formula used to calculate the interest rate would have it do so. An interest rate floor reduces the risk to the bank or other party receiving the interest. See also: Interest Rate Ceiling.

Interest Rate Floor

The lowest interest rate possible under an ARM contract.

Floors are less common than ceilings. See Adjustable Rate Mortgage (ARM)/How the Interest Rate on an ARM Is Determined.

References in periodicals archive ?
584) (3,014) Interest rate floor under 2014 First Lien Credit
Since the interest rate floor resets on every contract anniversary date, just as annuity index floors do, the client has the potential for new credits based on interest rate increases, regardless of the previous year's ups or downs.
Treasury bonds, due to their security, gauge interest rates by setting the interest rate floor of financial markets.
1256(b)(2) to provide that no "interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or similar agreement" would be treated as a Sec.
However, at the same time it will be tied to an interest rate floor of 2.
Home loans today pierced the interest rate floor of 8 per cent that the State Bank of India had set in earlier this year.
Interest Rate Collar--An agreement in which one party purchases an interest rate cap and sells an interest rate floor and the other sells an interest rate cap and buys an interest rate floor.
For the Federal Reserve to be able to set a similar interest rate floor, it would need expanded legislative authority, for example, to pay interest on excess reserves.
the simultaneous purchase of an interest rate cap option and the sale of an interest rate floor option--should be accorded hedging treatment.
584) (3,039) Interest rate floor under 2014 First Lien Credit
Survivorship Plus IUL gives policyholders a minimum annual 2% interest rate floor on policy value accumulation that will be credited monthly, a guarantee that the policy cap percentage on potential indexed interest will never be less than 10% and most importantly, a no-lapse death benefit rider that can extend guaranteed protection up to age 121 of the younger insured.
For example, an interest rate floor requires that the dealer pay the servicer an interest spread on a notional principal amount (a theoretical or imaginary amount) when the market interest rate declines below a specified strike price (the floor).