Ceiling

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DEFINITION of 'Ceiling'

The maximum level permissible in a financial transaction. Ceiling refers to the highest price, the maximum interest rate, or the largest of some other factor involved in a transaction. For example, the interest rate ceiling on a credit card is the highest interest rate that could be charged for purchases, cash advances, penalty APR, etc. An adjustable rate mortgage (ARM) might include an interest rate ceiling; the maximum interest that the mortgagor would be allowed to pay.

BREAKING DOWN 'Ceiling'

Ceilings are intended to keep prices, interest rates, rents, charges, debts and other financial transactions under certain levels. Examples include bond issuers who may cap the amount of interest they would be willing to pay; investors who attach a price ceiling or limit to a position order; maximum rents allowable for certain properties; or debt ceilings, the amount of debt above which an entity can no longer borrow, as issued by local, state or federal governments.

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