Floating Interest Rate
Definition of 'Floating Interest Rate'An interest rate that is allowed to move up and down with the rest of the market or along with an index. This contrasts with a fixed interest rate, in which the interest rate of a debt obligation stays constant for the duration of the agreement.A floating interest rate can also be referred to as a variable interest rate because it can vary over the duration of the debt obligation. |
|
Investopedia explains 'Floating Interest Rate'For example, residential mortgages can be obtained with a fixed interest rate, which is static and can't change for the duration of the mortgage agreement, or with a floating interest rate, which changes periodically with the market. In the case of floating interest rates in mortgages, and most other floating rate agreements, the prime lending rate is used as a basis for the floating rate, with the agreement stating that the interest rate charged to the borrower is the prime interest rate plus a certain spread. |
Related Definitions
Articles Of Interest
-
How Interest Rates Affect The Stock Market
Whether you're buying lunch, a home or a stock, you're influenced by interest rates. -
The Impact Of An Inverted Yield Curve
Find out what happens when short-term interest rates exceed long-term rates. -
Mortgages: Fixed-Rate Versus Adjustable-Rate
Both of these have advantages and disadvantages depending on your financial needs and prospects. -
What Investors Should Know About Interest Rates
Understanding interest rates helps you answer the fundamental question of where to put your money. -
ARMed And Dangerous
In a climate of rising interest rates, having an adjustable-rate mortgage can be risky. -
How do companies benefit from interest rate and currency swaps?
An interest rate swap involves the exchange of cash flows between two parties based on interest payments for a particular principal amount. However, in an interest rate swap, the principal amount ... -
Why The Consumer Price Index Is Controversial
Find out why economists are torn about how to calculate inflation. -
Predict Inflation With The Producer Price Index
Find out how the PPI can be used to gauge the overall health of the economy. -
Why Your Pension Plan Has Sovereign Debt In It
One type of security pensions tend to invest in is sovereign debt, or debt issued by a government. -
Leading Economic Indicators Predict Market Trends
Leading indicators help investors to predict and react to where the market is headed.
Free Annual Reports