Adjustable rate

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Adjustable rate

Applies mainly to convertible securities. Refers to interest rate or dividend that is adjusted periodically, usually according to a standard market rate outside the control of the bank or savings institution, such as that prevailing on Treasury bonds or notes. Typically, such issues have a set floor or ceiling, called caps and collars that limits the adjustment.

Adjustable Rate

An interest rate on a loan or convertible security that changes periodically. For example, an adjustable rate mortgage has a certain interest rate that changes with varying frequency. The frequency of the change is called the adjustment rate. Usually, the adjustable rate is set according to some outside benchmark; for example, a loan might set the interest rate at LIBOR + 1%. An advantage of adjustable rate loans is the fact that one's interest rate might fall over time; this is a particular advantage if prevailing interest rates are high at the time of the loan. A disadvantage to adjustable rates is the uncertainty associated with them: one's payments on the loan generally rise or fall.
References in periodicals archive ?
BANK of Ireland will not cut variable interest rates, despite being warned the Government may impose a levy on it.
We have therefore taken a decision to announce future pricing changes for retail and small business variable interest rates on the second Friday of each month,' said Philip Chronican, chief executive of Australian operations.
However, noted S & P, a minority of households with high debt and variable interest rates will encounter more difficulty, especially if the economy falters as interest rates rise.
The variable interest rates on these credit-enhanced bonds is also being "hedged" via a swap credit enhanced by Freddie Mac, which is also credit enhancing the bonds.
Professor David Miles, of Imperial College, London, said lenders were using higher variable interest rates paid by customers to subsidise lower deals to attract new borrowers.
Their smart mortgage offers variable interest rates of just 4.
For versions of the instruments, depending on the manner in which the interest rate is reset on the remarketed bonds, the rules for variable interest rates under Regs.
Among the factors omitted from the calculations of interest rates, for example, are commissions and the full extent of variable interest rates.
Special rules apply to rental agreements with floating rent, rent based on variable interest rates, or contingent rent.
These variable interest rates are lower than similar rates charged by Japanese banks.
Because of the large spread between CFC's 7-Year SFR and long-term variable interest rates, several members have converted to the variable rate on an interim or temporary basis, with the intention of converting back to a fixed rate in the future.

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