Interest Rate Floor

"Interest Rate Floor" is a contractual provision that sets a minimum limit on the interest rate applicable to a financial product, such as a loan, mortgage, or derivative contract. Essentially, it ensures that the interest rate on the instrument will not fall below a predetermined level, regardless of market fluctuations.

This provision offers protection to lenders or investors against adverse movements in interest rates, especially in environments where rates are declining or are expected to decline.

For lenders or investors, an interest rate floor acts as a safeguard, ensuring a minimum return on their investment or loan.