Interest rate ceiling


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Interest rate ceiling

Ceiling

The maximum interest rate that may be charged on a contract or agreement. For example, an adjustable-rate mortgage may have an interest rate ceiling stating that the rate will not go over 9% even if the formula used to calculate the interest rate would have it do so. An interest rate ceiling reduces the risk of the party paying the interest. It is also called an interest rate cap. See also: Interest Rate Floor.

Interest Rate Ceiling

The highest rate possible under an ARM contract; same as “lifetime cap.”

It is often expressed as a specified number of percentage points above the initial interest rate. See Adjustable Rate Mortgage (ARM)/ How the Interest Rate on an ARM Is Determined.

References in periodicals archive ?
33) Two factors gave impetus to the creation of MMMFs: the high inflation of the 1970s, which became embedded in market expectations, and the rise of market interest rates to levels much higher than those permitted by Regulation Q interest rate ceilings.
These cross-product terms are included since the impact of these creditor remedies may vary with the level of the interest rate ceiling.
When interest rate ceilings are in place, high-risk customers will be denied a loan at institutions where the ceilings apply.
As with ceilings on deposits, government-imposed interest rate ceilings on loans can also limit competition.
Restiveness about the Reg Q structure came to a head and the interest rate ceilings were gradually removed.
The interest rate ceilings on time deposits of less than seven days and constraints on banks providing benefits for deposits, such as gifts, were lifted in July last year.
Historical comparisons of deposit rates can be tricky, in part because retail deposit rates were subject to interest rate ceilings before the 1980s.
In particular, the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) of 1980, which mandates the gradual phaseout of the interest rate ceilings, and the Garn-St.
There are some other interest rate ceilings (on some types of credit and government-insured mortgages) still in force, but these are not serious interventions by the government [Cargill pp.
When the old interest rate ceilings were finally phased out in 1980, that at least helped commercial banks compete without having to offer us toasters in lieu of higher interest.
The purpose was to allow banks and other financial institutions to conduct a deposit and loan business with foreign companies and individuals, including foreign banks, without being subject to reserve requirements or to the interest rate ceilings of the Federal Reserve Board.
However, this improved service may have resulted from the existence of interest rate ceilings on deposits that have caused banks to overinvest in real physical capital.