The prime rate is the interest rate that commercial banks charge their most creditworthy corporate customers, and it also serves as a widely used reference rate to which many variable rate loan products are pegged, including adjustable rate mortgages, home equity lines of credit and many credit cards, typically expressed as the prime rate plus a fixed margin. In the United States it has historically moved in step with the Federal Reserve's federal funds rate, running a fairly stable spread of about three percentage points above it. Although it originally represented the actual rate charged to a bank's best borrowers, the prime rate today functions mainly as this benchmark reference rate rather than a rate any specific loan is priced exactly at.
Facts
Classification
Timing Class Sources
1. US Leading Indicators (The Conference Board)
Prime rate (Wikipedia)
WikipediaWikipedia, "Prime rate", lead sectionQuote, Wikipedia, "Prime rate", lead section
The prime rate or prime lending rate is an interest rate used by banks, typically representing the rate at which they lend to their most creditworthy customers. Some variable interest rates may be expressed as a percentage above or below prime rate.
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