Ceiling

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Ceiling

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

Ceiling

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

Ceiling.

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.

ceiling

(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 ?
(2) Commercial banks were subject to deposit rate ceilings under the Federal Reserve's Regulation Q beginning in the 1930s.
The average lending rate ceiling and the cash ratio have had effects on the treasury bill rate that are opposite to the respective effects on loan and deposit rates.
(6) The removal of deposit rate ceilings and the widespread securitization of FRMs means that credit rationing no longer occurs when interest rates rise.
As interest rate ceilings become more restrictive, lenders are willing to assume only a lower degree of risk.
However, when low interest rate ceilings are in effect, lenders will be unable to raise interest rates (beyond the ceiling rates) to compensate for expected default losses.
Section II described the possible effects of state regulations governing interest rate ceilings and the exercise of creditor remedies.
The residential construction equation used for the table incorporates no adjustments for the disintermediation effects of bank deposit rate ceilings in the 1960s and 1970s.
The disintermediation episodes in the 1960s and 1970s were triggered when market interest rates breached the deposit rate ceilings imposed by Regulation Q.
However, the statute does not specify any particular rate ceiling, leaving that choice to the discretion of the creditor, or, in some instances, to determination by the applicable state usury law.
Ultimately, competitive forces will determine the level of the rate ceiling a particular creditor needs to establish (given the other features of its product) to maintain its share of the market.