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.
Investopedia explains '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.