Adjustable rate

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Adjustable rate

Applies mainly to convertible securities. Refers to interest rate or dividend that is adjusted periodically, usually according to a standard market rate outside the control of the bank or savings institution, such as that prevailing on Treasury bonds or notes. Typically, such issues have a set floor or ceiling, called caps and collars that limits the adjustment.

Adjustable Rate

An interest rate on a loan or convertible security that changes periodically. For example, an adjustable rate mortgage has a certain interest rate that changes with varying frequency. The frequency of the change is called the adjustment rate. Usually, the adjustable rate is set according to some outside benchmark; for example, a loan might set the interest rate at LIBOR + 1%. An advantage of adjustable rate loans is the fact that one's interest rate might fall over time; this is a particular advantage if prevailing interest rates are high at the time of the loan. A disadvantage to adjustable rates is the uncertainty associated with them: one's payments on the loan generally rise or fall.
References in periodicals archive ?
The 10-year term loan carried an adjustable interest rate of 3.24%, amortized over 25 years.
To narrow the current account deficit and reduce inflation, the central bank has employed a policy mix since late 2010 based on daily liquidity injections, an adjustable interest rate corridor - the gap between the overnight borrowing and lending rates - and a low policy rate.
If you have an adjustable interest rate tied to LIBOR or US Treasuries, your mortgage rate will probably fluctuate a little over the next few months as banks, investors, and money market funds figure out what to do with the temporary loss of a AAA credit rating for US Treasuries.
The NAHB also projects that the interest rate for fixed and adjustable interest rate mortgages will increase slightly in 2010 and 2011.
His recommendations include the reinstatement of usury laws to limit credit card and adjustable interest rate mortgages.
Also, unusual types of mortgages generally not available in the prime market, such as "2/28 hybrids." which switch to an adjustable interest rate after only two years of a fixed rate, would be labeled subprime even if they were given to borrowers with credit scores that were sufficiently high to quality for prime mortgage loans.
"They may have lost a job, are going through a divorce, health problems, an adjustable interest rate. But a promise was made to a lender, and you have to deal with it," he said.
Since mid 2005, with rising interest rate and softening of house prices, home owners booked mortgage more and more on adjustable interest rate resets.
It's not that Islam does not allow for a profit from money being invested or on trade finance, but that profit must be structured in a different way other than some fixed or adjustable interest rate. "The ultimate goal is to move toward the principle of profit and loss sharing," Khan added.
The minimum household income first-time buyers needed to purchase a median-priced home at $478,710 in California in the third quarter of 2006 was $98,890, based on an adjustable interest rate of 6.58 percent and assuming a 10 percent down payment, said C.A.R.
The adjustable interest rate, a percentage point or two over prime, is charged only on the amount withdrawn a nice fit with remodeling's periodic, unpredictable cash needs.
Now any newly established home equity line with an adjustable interest rate must carry a rate ceiling.

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