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. Investopedia Says:
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:
Adjustable-Rate Mortgage
Ceiling
Fixed Interest Rate Mortgage
Interest Rate
Interest Rate Floor
Interest Sensitive Stock
Loan
Loan Sharking
Mortgage
Variable Interest Rate |