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 ?
Reason to Expect Asymmetric Behavior in the Prime Rate
Nordea's Prime Rate is primarily used as a reference rate for housing loans.
Rates on housing loans tied to long-term prime rates are likely to be raised.
Here is a look at the federal funds rate, the discount rate and the prime rate since 1990.
The new rate is the lowest since June 2003 when the prime rate stood at 1.
Since early this year, the prime rate has dropped from 8.
as well as other lenders Shinsei Bank and Aozora Bank, are expected to announce the raise on their long-term prime rate, charged on loans of more than one year to their most creditworthy corporate clients, on Wednesday, the sources said.
BUSINESSES: The vast majority of small-business loans are at adjustable rates that rise and fall with changes in the prime rate.
Prime Rate Investors (Pink Sheets: PRRM) is a multi-media holding company with interests in outdoor sports, retail, e-tail, print, web, television and film.
Mizuho Corporate Bank said Monday it will cut its long-term prime rate by 0.
The new rate will be the highest since November 2000, when the prime rate stood at 2.
PRIME RATE INVESTORS (Pink Sheets:PRRM) is a multi-media holding company with interests in outdoor sports, retail, e-tail, print, web, television and film.