The Prime Lending Rate – sometimes just called “Prime” – is the interest rate that banks charge each other for overnight loans. Some consumer rates – like ARMs – are set in relation to Prime.
In the US, Prime is affected by the Federal Reserve lending rate to banks; historically, Prime is about 3 percent above the Fed rate.
The video shows an example.
- The Federal Reserve loans to Bank A at 1%
- Bank A loans to Bank B at 4%
- Both banks – A & B – will recalculate variable-rate loans like ARMs on that 4% Prime figure.
ARM rates are frequently defined as “% above Prime” – that gap is usually called the “margin” or “spread.” Just remember those 3 layers in Prime: Federal Reserve Bank A Bank B And finally, YOUR rate.
TitleTap
TitleTap provides turn-key websites and marketing tools like Video, Social Media Management, and Email Marketing for Title Agents and Real Estate Attorneys. Get more great marketing tips like this specifically relevant to Real Estate, Title Insurance, Mortgage Lending, and Law by subscribing or visiting our blog above.
Latest posts by TitleTap (see all)
- Why market while I’m busy? 6 Ways A TitleTap Website Frees Up Your Time When You Are Slammed - February 3, 2021
- How To Get More Business From Your Competition Without Taking Cheap Shots - February 2, 2021
- 4 New Website Designs Released! - December 4, 2020