prime rate

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Prime rate

The interest rate at which banks lend to their best (prime) customers. More often than not, a bank's most creditworthy customers borrow at rates below the prime rate.

Prime Rate

The best available interest rate under most circumstances. In general, only the most creditworthy customers receive the prime rate, but this is not always true. In any case, a prime rate serves as a benchmark against which other interest rates are compared.

prime rate

A short-term interest rate quoted by a commercial bank as an indication of the rate being charged on loans to its best commercial customers. Even though banks frequently charge more and sometimes less than the quoted prime rate, it is a benchmark against which other rates are measured and often keyed. For various reasons, a rising prime rate is generally considered detrimental to security prices. Also called prime.

Prime rate.

The prime rate is a benchmark for interest rates on business and consumer loans.

For example, a bank may charge you the prime rate plus two percentage points on a car loan or home equity loan.

The prime rate is determined by the federal funds rate, which is the rate banks charge each other to borrow money overnight. If banks must pay more to borrow, they raise the prime rate. If their cost drops, they drop the prime rate. The difference between the two rates is three percentage points, with the prime rate always the higher number.

The federal funds rate itself is determined by supply and demand, prompted by the actions of the Open Market Committee of the Federal Reserve to increase or decrease the money supply.

prime rate

the INTEREST RATE charged by COMMERCIAL BANKS for short-term LOANS to their most preferential customers. The prime rate is somewhat lower than other commercial borrowing rates but applies only to what may be called ‘blue-chip’ companies, generally large companies with the highest credit ratings. See BANK LOAN, BASE RATE.

prime rate

Traditionally defined as the rate of interest charged by a financial institution to its best customers. In reality, many commercial loans are quoted in terms of “prime minus one quarter,”for example, which indicates there are better rates than prime. In addition, many lenders offer rates based on the London Interbank Offered Rate (LIBOR), resulting in interest rates less than prime. Today,prime rate is often just a published rate by a financial institution,called its prime rate whether it is the lowest offered rate or not.

References in periodicals archive ?
Other banks will likely follow Mizuho's move to raise their prime lending rates, analysts say.
Bancorp last announced a change in its prime lending rate on January 22, 2008, when it was decreased 75 basis points to 6.
Many of these loans are tied to banks' prime lending rates, which move in lock step with changes in the federal funds rate.
CHICAGO, April 19 /PRNewswire/ -- Harris Trust and Savings Bank and its community banks today announced that they are raising their prime lending rate from 6.
Bancorp last announced a change in its prime lending rate on October 31, 2007, when it was decreased 25 basis points to 7.
BOM) is set to take a decision on cutting its prime lending rate in the next 10 days, according to a report by Dow Jones Newswires.
Mizuho Corporate Bank said Wednesday it will raise its long-term prime lending rate from the present 1.
If an employee has good credit, they can get a card with a limit of several thousand dollars at the prime lending rate plus 6.
CHICAGO, March 24 /PRNewswire/ -- Harris Trust and Savings Bank and its community banks announced that they are raising their prime lending rate from 6.
Bancorp last announced a change in its prime lending rate on September 18, 2007, when it was decreased 50 basis points to 7.
The state-run lender has cut its prime lending rate by 25 basis points to 12.
CHICAGO, March 17 /PRNewswire/ -- Harris Trust and Savings Bank and its community banks announced that they are raising their prime lending rate from 5.

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