prime rate

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Prime rate

The interest rate at which banks lend to their best (prime) customers. More often than not, a bank's most creditworthy customers borrow at rates below the prime rate.

Prime Rate

The best available interest rate under most circumstances. In general, only the most creditworthy customers receive the prime rate, but this is not always true. In any case, a prime rate serves as a benchmark against which other interest rates are compared.

prime rate

A short-term interest rate quoted by a commercial bank as an indication of the rate being charged on loans to its best commercial customers. Even though banks frequently charge more and sometimes less than the quoted prime rate, it is a benchmark against which other rates are measured and often keyed. For various reasons, a rising prime rate is generally considered detrimental to security prices. Also called prime.

Prime rate.

The prime rate is a benchmark for interest rates on business and consumer loans.

For example, a bank may charge you the prime rate plus two percentage points on a car loan or home equity loan.

The prime rate is determined by the federal funds rate, which is the rate banks charge each other to borrow money overnight. If banks must pay more to borrow, they raise the prime rate. If their cost drops, they drop the prime rate. The difference between the two rates is three percentage points, with the prime rate always the higher number.

The federal funds rate itself is determined by supply and demand, prompted by the actions of the Open Market Committee of the Federal Reserve to increase or decrease the money supply.

prime rate

the INTEREST RATE charged by COMMERCIAL BANKS for short-term LOANS to their most preferential customers. The prime rate is somewhat lower than other commercial borrowing rates but applies only to what may be called ‘blue-chip’ companies, generally large companies with the highest credit ratings. See BANK LOAN, BASE RATE.

prime rate

Traditionally defined as the rate of interest charged by a financial institution to its best customers. In reality, many commercial loans are quoted in terms of “prime minus one quarter,”for example, which indicates there are better rates than prime. In addition, many lenders offer rates based on the London Interbank Offered Rate (LIBOR), resulting in interest rates less than prime. Today,prime rate is often just a published rate by a financial institution,called its prime rate whether it is the lowest offered rate or not.

References in periodicals archive ?
TO) has announced that it has cut its long prime interest rate.
BOWLING GREEN, Ohio, June 29 /PRNewswire-FirstCall/ -- Sky Financial Group announced that it is raising the prime interest rate to 8.
May 10 /PRNewswire-FirstCall/ -- Effective today, Wachovia Corporation raised its prime interest rate to 8.
BOWLING GREEN, Ohio, May 10 /PRNewswire-FirstCall/ -- Sky Financial Group announced that it is raising the prime interest rate to 8.
Colonial Bank announced today that it will increase its prime interest rate by 0.
BOWLING GREEN, Ohio, March 28 /PRNewswire-FirstCall/ -- Sky Financial Group announced that it is raising the prime interest rate to 7.
March 28 /PRNewswire-FirstCall/ -- Effective today, Wachovia Corporation raised its prime interest rate to 7.
Long-term plan loans usually charge the prime interest rate plus one or two percentage points.
The floating rate monthly dividend on the Class II Preferred Shares, Series 1 is based on the prime interest rate on February 28, 2006.
The proceeds to redeem the $7,000,000 of the Trust Preferred Securities will come from an adjustable prime interest rate bank borrowing, currently at 7.
D), based on the average Canadian prime interest rate for the quarter ended December 31, 2005, amounted to $0.