Locked-In Interest Rate


DEFINITION of 'Locked-In Interest Rate'

Referring to a loan where the borrower and lender agree on a constant rate for a specified period. The lending institution promises to charge this locked in rate as a legal commitment. Sometimes there are certain qualifications or exceptions which, if not met over the life of the loan, will allow the lender to charge a higher rate.

Also known as a "fixed rate."

BREAKING DOWN 'Locked-In Interest Rate'

A borrower would want to lock in their interest rate if they believe the rate will increase over the life of the loan. Interest rates will fluctuate over time and for mortgages based on the five and ten year Treasury Note Yields. Higher demand for these notes will result in lower interest rates. A floating rate loan is the opposite of a fixed or locked-in rate.

  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Initial Interest Rate

    The interest rate that is initially assessed on an adjustable-rate ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with ...
  4. Fixed Interest Rate

    An interest rate on a liability, such as a loan or mortgage, ...
  5. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  6. Treasury Note

    A marketable U.S. government debt security with a fixed interest ...
Related Articles
  1. Home & Auto

    Got A Good Mortgage Rate? Lock It Up!

    Rising rates mean rising profits for lenders, providing incentive to increase rates whenever possible.
  2. Economics

    How Interest Rates Affect The Housing Market

    Understand how rate changes can affect home prices, and learn how you can keep up.
  3. Options & Futures

    Score A Cheap Mortgage

    Hidden costs can create what looks like a good deal. Find out how to find the best mortgage possible.
  4. Personal Finance

    Why Are Mortgage Rates Increasing?

    Learn how the secondary mortgage market and investor demand affect the cost of home ownership.
  5. Credit & Loans

    Rate Freeze To Cool Mortgage Meltdown

    The U.S. government is offering help to subprime borrowers. Is this a cure or a curse?
  6. Insurance

    What is a Force Majeure?

    A force majeure clause frees both parties in a contract from fulfilling their obligations in the event of some catastrophic or unexpected occurrence.
  7. Credit & Loans

    Explaining Equated Monthly Installments

    An equated monthly installment is a fixed payment a borrower makes to a lender on the same date of each month.
  8. Investing Basics

    Tiny House Movement: Making Market Opportunities

    The tiny house movement throws all assumptions about household budgeting and mortgage management out the window, and creates new market segments too.
  9. Investing

    Where Should I Keep My Down Payment Savings?

    While saving up for a down payment, where should you keep your money. A bank? The stock market? It all depends on your timeline.
  10. Credit & Loans

    Questions To Ask Your Mortgage Lender

    When buying a house, avoid nasty surprises by asking the right questions about your mortgage lender's qualifications and the mortgage process.
  1. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  2. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  3. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  4. How was the American Dream impacted by the housing market collapse in 2008?

    The American Dream was seriously damaged by the housing market collapse in 2008. In many ways, the American Dream is a self-fulfilling ... Read Full Answer >>
  5. How much risk is associated with subprime mortgages?

    A large amount of risk is associated with subprime mortgages. Since the mortgages are specifically for people who do not ... Read Full Answer >>
  6. What are the financial consequences of filing for bankruptcy?

    The financial consequences of filing for bankruptcy are substantial and can be long-lasting. They include impacts on your ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  2. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  3. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  4. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  5. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  6. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!