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Related to Interest Rate Caps: Interest rate cap and floor, Interest Rate Floors


The highest price, interest rate, or other numerical factor allowable in a financial transaction.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


The maximum interest rate that may be charged on a contract or agreement. For example, an adjustable-rate mortgage may have an interest rate ceiling stating that the rate will not go over 9% even if the formula used to calculate the interest rate would have it do so. An interest rate ceiling reduces the risk of the party paying the interest. It is also called an interest rate cap. See also: Interest Rate Floor.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


If there is an upper limit, or cap, on the interest rate you can be charged on an adjustable-rate loan, it's known as a ceiling.

Even if interest rates in general rise higher than the interest-rate ceiling on your loan, the rate you're paying can't be increased above the ceiling.

However, according to the terms of some loans, lenders can add some of the interest they weren't allowed to charge you because of the ceiling to the total amount you owe. This is known as negative amortization.

That means, despite a ceiling, you don't escape the consequences of rising rates, though repayment is postponed, often until the end of the loan's original term.

Ceiling can also refer to a cap on the amount of interest a bond issuer is willing to pay to float a bond. Or, it's the highest price a futures contract can reach on any single trading day before the market locks up, or stops trading, that contract.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.


(1) The uppermost surface of a room or space. When a lease makes all improvements “below ceiling”the responsibility of the tenant,one must ask if “ceiling”means the concrete bottom of the floor above,or if it means the suspended grid system with ceiling tiles.The space in between the two is called the plenum.All the wiring,plumbing,and ductwork go through the plenum,so the choice of which surface is the “ceiling”could mean a substantial difference in tenant responsibilities.

(2) An upper limit on something,such as the IRS ceiling of $1,000,000 worth of home mortgage debt for which one can deduct mortgage interest.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
Originally, the colonies imported English law, which included an interest rate cap statute called the Statute of Anne.
The only limitation on the interest deduction wi be the interest rate cap imitations specified in Sec.
Indexed/fixed-rate bonds are effectively a combination of a fixed-rate bond and an interest rate cap. Indexed bonds carry a fixed coupon for the life of the bond, plus incremental interest payments that are made during the first five years, only to the extent that a money-market index exceeds a particular level.
Banking lending to SMEs declined by 5.7 per cent, an equivalent of Sh13.8 billion in eight months after interest rate cap was passed into law in September 2016.
As the interest rate cap marks a year since it came into force, an inter- nal CBK study has already indicated tougher times for the banking sector and the multiple ripple effects on the Kenyan economy.
Last year, state Banking Commissioner Peter Hildreth testified in favor of an interest rate cap, saying he was concerned that New Hampshire would become a magnet for such borrowers.
Specific products in the option-type instrument classification include option contracts, interest rate caps, interest rate floors, fixed rate loan commitments, note issuance facilities, and letters of credit.
Interest Rate Caps. An interest rate cap is a financial instrument under which payments occur if an interest index (e.g., Kenny) exceeds a certain level, the "Cap Rate." The cap owner makes a one-time, up-front payment to the cap writer and receives an uncertain stream of payments from the cap writer over the term of the cap.
Examples include interest rate caps and floors, insurance contracts without subrogation rights and compensation promised to a third party if a transaction or other event occurs.
Last month, the regulator said they intend to complete outstanding policy reviews not limited to that of interest rate caps by June this year.
Global Banking News-March 23, 2018--Mongolian central bank opposes interest rate caps