Drop lock


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Drop lock

The fixing of the interest rate on a floating-rate note or preferred stock if it falls to a specified level.
References in periodicals archive ?
"With our Drop Lock, customers can take advantage of an excellent tracker rate of 3.99% with the security to move to a fixed rate at any time.
"When a customer is undecided between a tracker and a fix, the Drop Lock option gives more freedom."
"Once borrowers choose a drop lock option, they have to choose between a loan with a big fee and a low rate, or vice versa.
"If they intend to exercise the drop lock within a short time, like a year, it might make sense to take a lower fee with a higher rate because a high fee would cost them dearly over a short period."
Yorkshire Building Society has entered the Drop Lock market with two three-year tracker products at 2.29% and 2.49% for those with a 25% deposit - lower than any standard variable rate that is currently available - as well as 3.99% for 10% deposits.
Drop Lock deals give the flexibility needed in an uncertain market with the chance to take advantage of lower tracker rates, but with the security of being able to move to a fixed rate at any time if the base rate goes up.
It comes with a drop lock facility that allows the rate to be changed in the event that fixed rates move in a favourable direction or if borrowers want to change to a fixed rate.
'Borrowers wavering between a fixed or variable rates,' advises Mr Bitner, 'should consider a tracker or discount deal with no early redemption charges or a 'drop lock'.