Interest rate ceiling


Interest rate ceiling

See: Interest rate cap

Ceiling

The maximum interest rate that may be charged on a contract or agreement. For example, an adjustable-rate mortgage may have an interest rate ceiling stating that the rate will not go over 9% even if the formula used to calculate the interest rate would have it do so. An interest rate ceiling reduces the risk of the party paying the interest. It is also called an interest rate cap. See also: Interest Rate Floor.

Interest Rate Ceiling

The highest rate possible under an ARM contract; same as “lifetime cap.”

It is often expressed as a specified number of percentage points above the initial interest rate. See Adjustable Rate Mortgage (ARM)/ How the Interest Rate on an ARM Is Determined.