Match-Rate Funds


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.

BREAKING DOWN '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.

  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. Maturity

    The period of time for which a financial instrument remains outstanding. ...
  5. Capitalization Rate

    The rate of return on a real estate investment property based ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, ...
Related Articles
  1. Mutual Funds & ETFs

    Top 3 Muni California Mutual Funds

    Discover analyses of the top three California municipal bond mutual funds, and learn about their characteristics, historical performance and suitability.
  2. Economics

    Is the U.S. Economy Ready for Liftoff?

    The Fed continues to delay normalizing rates, citing inflation concerns and “global economic and financial developments” in explaining its rationale.
  3. Mutual Funds & ETFs

    Top 4 Investment Grade Corporate Bonds ETFs

    Discover detailed analysis and information about some of the top exchange-traded funds (ETFs) that offer exposure to the investment-grade corporate bond market.
  4. Investing News

    Could a Rate Hike Send Stocks Higher?

    A rate hike would certainly alter the investment scene, but would it be for the better or worse?
  5. Professionals

    Will Interest Rates Rise at the Next Fed Meeting?

    Everyone wants to know what the Federal Reserve will do next, but the Fed doesn't even know what it's next move will be.
  6. Investing Basics

    The 4 Biggest Bond Myths

    Bonds can be a great addition to a portfolio but be aware of these four myths.
  7. Professionals

    How Retirees Should Prepare for a Rate Hike

    Janet Yellen has indicated that there will likely be a rate hike later this year. Here's how retirees should prepare.
  8. Investing

    Watch Your Duration When Rates Rise

    While recent market volatility is leading investors to look for the nearest exit, here are some suggestions for bond exposure in attractive sectors.
  9. Bonds & Fixed Income

    What are Treasury STRIPS?

    STRIPS is an acronym that stands for Separate Trading of Registered Interest and Principal Securities.
  10. Investing Basics

    How Does a Convertible Debenture Work?

    A convertible debenture is an interest-bearing loan a company issues that can be turned into stock.
  1. Are high yield bonds a good investment?

    Bonds are rated according to their risk of default by independent credit rating agencies such as Moody's, Standard & ... Read Full Answer >>
  2. What are the best ways to sell an annuity?

    The best ways to sell an annuity are to locate buyers from insurance agents or companies that specialize in connecting buyers ... Read Full Answer >>
  3. What are the maximum Social Security disability benefits?

    The maximum Social Security disability benefit amount for a single eligible person in 2015 is $1,165 per month, but you can ... Read Full Answer >>
  4. How can the federal reserve increase aggregate demand?

    The Federal Reserve can increase aggregate demand in indirect ways by lowering interest rates. Aggregate demand is a measure ... Read Full Answer >>
  5. How does the stock market react to changes in the Federal Funds Rate?

    The stock market reacts to changes in the federal funds rate in various ways depending on where it is in the business cycle. ... Read Full Answer >>
  6. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... 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!