Interest Rate Floor

Interest rate floor

An interest rate agreement in which payments are made when the reference rate falls below the strike rate. Related: Interest rate cap.

Interest Rate Floor

The minimum interest rate that may be charged on a contract or agreement. For example, an adjustable-rate mortgage may have an interest rate floor stating that the rate will not go below 3.5% even if the formula used to calculate the interest rate would have it do so. An interest rate floor reduces the risk to the bank or other party receiving the interest. See also: Interest Rate Ceiling.

Interest Rate Floor

The lowest interest rate possible under an ARM contract.

Floors are less common than ceilings. See Adjustable Rate Mortgage (ARM)/How the Interest Rate on an ARM Is Determined.

References in periodicals archive ?
Adding an interest rate floor to the asset side of the pension balance sheet can offset much of the risk, in this case.
The second amended and resaid Lion Oil term loan facility, which closed on the same date as the acquisition of Alon USA common stock, has a five-year term and the interest rate is based, at Lion Oil's election, on a LIBOR or base rate plus applicable margins, subject in each case to an all-in interest rate floor of 5.
Since the interest rate floor resets on every contract anniversary date, just as annuity index floors do, the client has the potential for new credits based on interest rate increases, regardless of the previous year's ups or downs.
Treasury bonds, due to their security, gauge interest rates by setting the interest rate floor of financial markets.
1256(b)(2) to provide that no "interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or similar agreement" would be treated as a Sec.
5 percent and many banks have an interest rate floor in the 6 percent range.
Without the interest rate floor established by the corridor, such an injection of reserves could push the policy rate well below its target.
However, at the same time it will be tied to an interest rate floor of 2.
Home loans today pierced the interest rate floor of 8 per cent that the State Bank of India had set in earlier this year.
Interest Rate Collar--An agreement in which one party purchases an interest rate cap and sells an interest rate floor and the other sells an interest rate cap and buys an interest rate floor.
This paper uses the IMF's macroeconomic model MULTIMOD to examine the implications of the zero interest rate floor (ZIF) for the design of monetary policy in Japan.
This interest rate floor has been applied to every class of deposit from March 15, 1994.