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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
But variable rates are unpredictable as they may rise or fall anytime.
One in 20 on variable rates say a rise would leave them struggling.
Over the past three years average rates have fallen sharply, significantly widening the gap between them and standard variable rates. As a result, borrowers have been able to make considerable savings.
Mr McGrath said: "The essential purpose of the meetings between Minister Noonan and the banks in recent weeks was to reduce the exorbitant standard variable rates being charged by the banks to 300,000 mortgage customers.
So far only a handful of lenders have said they will reduce their standard variable rates.
Despite predictions that interest rates will fall in the new year, leading economists are predicting that lenders will increase the variable rates during 2008, in an attempt to preserve the profit margins.
* Fixed rate with a swap to variable rates estimated at BMA (currently 1.03 percent) plus 24 basis points, the difference between the fixed rate on the bonds and the swap receiver rate
The Board approved the sale of up to $63 million in one or more series of 25year tax-exempt bonds sold at fixed and/or variable rates on behalf of the hospital, which has facilities in the town of Greece and the city of Rochester, both in Monroe County.
Britain's biggest mortgage lender Halifax also withdrew its new standard variable rate after the Ombudsman ruled its practice of having two standard variable rates was confusing.
However, for a variety of reasons, many communities fail to take this occasion to consider variable rates, a feature that will bring benefits for many years to come.

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