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 ?
The prime rate, not a deposit rate, is the focus in this article because the prevailing prime rate is much more uniform across banks than any measure of the prevailing deposit rate.
Clearly, the average prime rate is not the only independent variable that influences underwriting combined ratios.
With the prime rate at 8 1/2 percentage last spring, the typical borrower with a $13,000 balance and an interest rate of 10 percent would have paid $108 of interest each month.
Comerica Bank, the subsidiary of Comerica Incorporated (NYSE: CMA), has said that it will reduce its prime rate to 5.25 percent from 5.50 percent.
Wells Fargo Bank, N.A, the subsidiary of Wells Fargo & Company (NYSE: WFC), has said that it will reduce its prime rate to 5.25 percent from 5.50 percent.
TCF Financial Corporation (NYSE: TCF) and its subsidiaries have said that they will decrease their prime rate to 5.25 percent from 5.50 percent.
ING Prime Rate Trust (NYSE: PPR), a diversified closed-end management investment company which is part of ING (NYSE: ING) (INGA.AS), has said that it is planning to redeem a part of its outstanding auction-rate preferred shares (ARPS).
Finnish savings bank Aktia Savings Bank Plc said on Friday (7 November) that it will lower its prime rate by 0.50 percentage points to 4.50%.
A short-term prime rate is a key yardstick banks refer to when determining the rates they charge corporate borrowers.
Saddled with fresh principal payments and perhaps higher interest rates because rates for such loans reset to correlate with the prime rate, buyers may be overwhelmed.
M2 EQUITYBITES-August 2, 2019--Dollar Bank reduces prime rate
BANKING AND CREDIT NEWS-August 2, 2019--TCF Bank reduces prime rate