A trigger rate is the rate, that if surpassed, requires a variable-rate borrower to increase her payment. Trigger rates are linked to prime rate. They ensure that variable-rate borrowers with fixed payments always cover at least the interest due to a lender is fast rising rate environments.
Trigger rates have nothing to do with adjustable-rate mortgages, which have payments that rise and fall with prime rate.
Spy Tip: Prime rate would typically have to rise 2% or more in order for the trigger rate to be exceeded.« Back to Glossary Index