DEFINITION of 'Interest Rate Ceiling'
The maximum interest rate that a financial institution can charge a borrower for an adjustable rate mortgage or loan according to the contractual terms of the mortgage or loan. This interest rate is expressed as an absolute percentage.
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BREAKING DOWN 'Interest Rate Ceiling'
For example, the terms of the loan might state that the interest rate can never exceed 19%.
An interest rate ceiling is sometimes used interchangeably with the term "lifetime interest rate cap". However, an interest rate cap is usually expressed as a maximum change allowed in an initial interest rate.
For example, a 5% interest rate cap would suggest that the interest rate on the borrower's loan can fluctuate within a 5% range during any specific rate adjustment period.
RELATED TERMS

Initial Interest Rate Cap
The maximum amount the interest rate on an adjustablerate loan ... 
Lifetime Cap
The maximum interest rate on an adjustablerate mortgage (ARM) ... 
Variable Rate Mortgage
A type of home loan in which the interest rate is not fixed. ... 
Capped Rate
An interest rate that is allowed to fluctuate, but which cannot ... 
Initial Rate Period
The period of an introductory or "teaser" interest rate on a ... 
Mortgage Rate
The rate of interest charged on a mortgage. Mortgage rates are ...
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