Conditional Prepayment Rate - CPR


DEFINITION of 'Conditional Prepayment Rate - CPR'

A loan prepayment rate that is equal to the proportion of the principal of a pool of loans that is assumed to be paid off prematurely in each period. The calculation of this estimate is based on a number of factors such as historical prepayment rates for previous loans that are similar to ones in the pool and on future economic outlooks.

BREAKING DOWN 'Conditional Prepayment Rate - CPR'

The CPR can be used for a variety of loans. For example, mortgages, student loans and pass-through securities all use CPR as estimates of prepayment.

Typically, CPR is expressed as a percentage. For example, a pool of mortgages with a CPR of 8% would indicate that for each period, 8% of the pool's remaining principal outstanding will be paid off.

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  6. Pass-Through Security

    A pool of fixed-income securities backed by a package of assets. ...
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