Match-Rate Funds

AAA

DEFINITION of 'Match-Rate Funds'

When the interest rate on a loan matches (or is extremely close to) the interest rate on the source of the funds loaned out. An example of this would be if a bank accepted a $100,000 deposit and agreed to pay 5% interest on it for five years, then loaned the $100,000 out at 5.25%.

A securitization lender would be a typical user of match-rate funds.

INVESTOPEDIA EXPLAINS 'Match-Rate Funds'

Match-rate funds typically come with very high penalty fees for early prepayment because the intermediary has agreed to pay a specific interest rate to the depositor. If prepayment was not discouraged, the intermediary could end up paying interest after it had stopped receiving interest payments.

RELATED TERMS
  1. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  2. Securitization

    The process through which an issuer creates a financial instrument ...
  3. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
  4. Personal Property Securities Register ...

    A written, public, online record of legal claims to personal ...
  5. Purchase Money Security Interest ...

    A security interest or claim on property that enables a lender ...
  6. Deficiency Balance

    The amount owed to a creditor if the sale proceeds from the collateral ...
RELATED FAQS
  1. How does the bond market react to changes in the Federal Funds Rate?

    The bond market is highly sensitive to changes in the federal funds rate. When the Federal Reserve increases the federal ... Read Full Answer >>
  2. What is a 'busted' convertible bond?

    In finance, a convertible bond represents a hybrid security that offers debt and equity features and risks. While a convertible ... Read Full Answer >>
  3. What are the differences between the Federal Funds Rate and LIBOR?

    In macroeconomics, the interest rate plays a crucial role in delivering an equilibrium on the assets market by equating the ... Read Full Answer >>
  4. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  5. What is the correlation between inflation and interest rate risk?

    There is a positive correlation between inflation and interest rate risk. Inflation basically occurs when there is too much ... Read Full Answer >>
  6. What is the correlation between term structure of interest rates and recessions?

    There is no question that interest rates have enormous macroeconomic importance. Many economists and analysts believe the ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: Select Sector Financial SPDR

    Find out more about the Financial Select Sector SPDR Fund, the characteristics of the exchange traded fund, and the suitability of fund.
  2. Mutual Funds & ETFs

    ETF Analysis: Vanguard Total Bond Market

    Learn about the Vanguard Total Bond Market exchange-traded fund, its primary portfolio holdings and risk/reward profile based on its past performance.
  3. Bonds & Fixed Income

    What are Floating-Rate Notes?

    A floating-rate note is a debt instrument with an interest rate that “floats,” or varies. They are also called floaters.
  4. Credit & Loans

    Understanding Your FICO Score

    Lenders use the FICO score to assess a loan applicant’s credit risk.
  5. Professionals

    Will Consumer Spending Save 2015?

    Consumer spending is considered an important number (and it is), but a savvy investor will always look at "why" rather than just "what." You should too.
  6. Economics

    Examples Of Negative Interest Rates

    Negative interest rates seem like an abstract notion. But, they have practical consequences for an economy and are present all around us.
  7. Personal Finance

    Are Markets Ready For An Interest Rate Hike?

    Despite financial market fears over the uncertainty of Greece’s debt crisis and the recent drop in China’s stock-market, Federal Reserve Chairwoman Janet Yellen has reaffirmed the Fed’s plans ...
  8. Home & Auto

    How the Fed Affects Reverse Mortgages

    An in depth look at how the Federal Reserve affects reverse mortgages.
  9. Economics

    Do Interest Rate Changes Affect Dividend Payers?

    Interest rate changes have an effect on prices of dividend-rich stocks in interest rate sensitive sectors like utilities, pipelines, telecommunications and REITs.
  10. Trading Strategies

    Will Higher Interest Rates Hurt Trading Activities?

    Do higher interest rates lead to less trading and lower interest rates lead to more trading? Investopedia debunks common myths around interest rates and trading.

You May Also Like

Hot Definitions
  1. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  2. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  3. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  4. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  5. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  6. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
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!