Teaser rate

Teaser rate

A low initial interest rate on an adjustable-rate mortgage to entice borrowers, that is later eliminated and replaced by a market-level rate.

Teaser Rate

In an adjustable-rate mortgage, an initial interest rate that one pays for a certain period of time, at which point the interest rate rises. A teaser rate exists in order to encourage people who would otherwise be unable to qualify for a mortgage to be able to buy a house. While a lender is required to disclose the higher interest rate and payment, their existence has been accused of creating a perverse incentive for unqualified borrowers to buy houses. Many believe this contributed to the housing bubble and the subsequent credit crunch.

Teaser rate.

A teaser rate is a low introductory interest rate on a credit card or an adjustable rate mortgage (ARM). The lender must tell you how long the teaser rate lasts and what the real cost of borrowing will be at the end of the introductory period.

teaser rate

A below-market rate for the initial period of an adjustable-rate mortgage.It is intended to attract borrowers to this type of loan. Interest usually adjusts to market rates or even somewhat higher on the first allowed adjustment date.

Teaser Rate

The initial interest rate on an ARM, when it is below the fully indexed rate.

See Adjustable Rate Mortgage (ARM)/Fully-Indexed Rate.

References in periodicals archive ?
NatWest and RBS took all teaser rate credit cards off the shelf for new customers from Monday 17th March 2014 and launched a new Clear Rate Platinum Card, which has an upfront interest rate.
Some young, healthy people get the teaser rate, but certainly not everybody does.
Experts believe that teaser rate schemes hide a bombshell that could ruin your finances once they go floating.
In 2003, we had a new form of subprime, [and many of the subprime mortgages that were getting approved] essentially [had] a two-year teaser rate, [After the two-year period, the rate] then went up to a much higher interest rate.
But as the public sector lender's teaser rate proved a huge success, HDFC was forced to follow suit.
For both closed- and open-end credit, the required information includes the period of time that teaser rate would be in effect, and the APR of the loan (or current payment) after the initial rate expires.
If you can't verify your income, you have nothing to put down on a new $600,000 home, and you can only afford the house at the introductory teaser rate, is it really all the fault of the bank lender and mortgage broker that you defaulted?
This explains why they are drawn to the zero percent teaser rate while dismissing the threat of the 2999 percent penalty down the road.
Consumers told us that their primary reason for acquiring a card was the APR, and it was also the primary reason for cancelling the same card once the teaser rate expired.
If we see too many lenders coming into the teaser rate space and the critical mass of such loans is too high in a portfolio, it could become a systemic concern.
Likewise for anyone holding a teaser rate loan with a mortgage payment that's going to rise come adjustment day.
In Q4 2010 58% of introductory balance transfer offers promoted a teaser rate duration of 13 months or more compared to just 20% a year ago.