(redirected from Rate Caps)
Also found in: Dictionary, Thesaurus, Medical, Legal, Encyclopedia.


The highest price, interest rate, or other numerical factor allowable in a financial transaction.


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.


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.


(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.

References in periodicals archive ?
Treasury last week promised the IMF that the interest rate caps would be removed in the next budget to allow the Central Bank more flexibility in directing the economy.
Stephen Mutoro, the Consum- ers Federation of Kenya (COFEK) Secretary-General criticised the IMF for its sustained tilt against the rate cap and added that failed IMF poli- cies were to blame for the sad state of Kenya's banking.
Still, restoring an interest rate cap is the time-tested reform which has proven most effective in curbing abusive money lending.
So, if one is accustomed to seeing small adjustments for interest fluctuations on renewals of multi-year guarantee annuities (MYGAs), expect those same adjustments to occur with renewal rate caps in an amount that is at least twice those of MYGA rates.
5] This study compares data from 1996-97, the year before the spending freeze and two years before the tax rate caps took effect, to data from 1999-00.
The only limitation on the interest deduction wi be the interest rate cap imitations specified in Sec.
If the rate cap is introduced and assuming no change in the CBR, this would mean that no loan could be priced above 14.
One reason for using this model was to provide a means (via the broker entity) to charge consumers an amount in excess of state and territory interest rate caps.
The ability of the collateral manager to purchase asset specific interest rate caps allows the use of an upfront payment from principal proceeds.
The Diet enacted the legislation last December to unify the lending rate caps at 20 percent and to eliminate gray-zone rates by late 2009.
The loan rate adjusts every six months to LIBOR with periodic and lifetime rate caps.
The actual return on equity (ROE) range would be established after expiration of the rate caps and cannot now be determined.