Interest Rate Floor

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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 ?
The majority of the portfolio was comprised of senior secured loans and more than 96% of these loans were variable-rate investments (indexed to LIBOR) with interest rate floors, which should continue to position the portfolio well for a potential rising interest rate environment.
accretion of debt related to the 2011 and 2014 interest rate floors are
In particular, banks' responses indicated stricter collateral requirements and increased use of interest rate floors for all types of household loans.
In particular, some banks reported increased credit line sizes, less strict collateral requirements, longer loan maturities, and reduced use of interest rate floors across all firm sizes, except in the case of micro enterprises.
NAFCU President/CEO Fred Becker wrote the Fed that interest rate floors are a vital tool to help credit unions manage interest rate risk and are a "vitally important planning tool for credit card issuers.
LENDERS who impose interest rate floors on tracker mortgages may be breaching regulatory rules if customers were not warned about the issue when they took out the loan, the City watchdog, the Financial Services Authority, told lenders yesterday.
Interest rate floors are typically used by issuers or obligors in connection with variable-rate debt, to economically provide a minimum rate payable on variable-rate debt without actually subjecting the terms of the debt to a minimum rate in exchange for receiving a premium.
Life companies have limited new lending for all property types to stabilized permanent mortgages, and have instituted interest rate floors at the 6.
1) As of September 30, 2012, approximately 55% of our debt portfolio at fair value had floating interest rates, 93% of which had interest rate floors, and approximately 45% of our debt portfolio had fixed interest rates.
In my view, among the easiest of the financial instruments to understand are the interest rate floors, interest rate swaps, call options on U.
While operating results are favorable and interest margins are currently healthy, the group has a fair amount of account values subject to interest rate floors.
This growth, bolstered by a continuation of solid credit quality trends, helped partially offset the impact of lower service fee income and decreased interest income from interest rate floors.