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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
Fixed rate or adjustable rate? Most seniors will select the option that provides the larger cash draw.
Summary: Adjustable rates and a lot of mortgage securities later triggered the 2008 crisis
Javelin is a Maryland corporation that invests primarily in fixed rate, adjustable rate and hybrid adjustable rate Agency residential mortgage-backed securities and non-Agency RMBS.
Larger franchise operators that have a financial executive may be more likely to consider an adjustable rate loan, because they have an eye to financial statements and can make a decision on when to pay down debt or to refinance into a fixed-rate product.
* $34 million adjustable rate mortgage to refinance the loan on a multifamily housing property with 288 living units in a building with 266,430 square feet of residential space in Camp Hill, Penn, (which is outside of Harrisburg)
The 15-year fixed mortgage rate and both the three-year and five-year adjustable rate mortgage products are the lowest since May 2013.
Adjustable rate and hybrid loans have the lowest average credit score of approximately 630.
Wells Fargo admits that adjustable rate mortgages, which are loans that begin with low, seemingly manageable payments but eventually mushroom to exorbitant rates that few borrowers can afford, are unfair and harmful to borrowers.
"Credit unions should consider moving to adjustable rate credit cards, because the Fed Funds rate can only go up from here," Joy, PSCU director of strategic consulting, said.
Adjustable rate mortgages (Pay Option ARM's) were widely used in the hot housing market of recent years.
First IB offers 'hybrid' adjustable-rate mortgages that carry a fixed rate for five or seven years and then reset annually to an adjustable rate. Currently, First IB offers rates as low as 5.375 percent annual percentage rate (APR), with no points, for a five-year adjustable rate jumbo mortgage.

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