It refers to a situation where the ratio of interest amount to loan principal within a certain period of time is higher than the benchmark interest rate that commercial banks implement to the main lender (or institution) in guiding and standardizing loan business procedures. Credit Policy. The benchmark interest rate ratio is generally formulated and released by the central bank of the country based on the socio-economic conditions at that time.
A 10% increase in interest rate refers to an increase of 10 percentage points on the basis of the base interest rate (calculated based on the current loan interest rate of 5.94% for more than five years), that is, 5.94%+5.94%*10 %=6.534% of equal principal and interest or conversion interest rate of equal principal.
The benchmark interest rate is a universal reference rate in the financial market. Other interest rate levels or financial asset prices can be determined based on this benchmark interest rate level.
Benchmark interest rate is one of the important prerequisites for interest rate marketization. Under the conditions of interest rate marketization, financiers measure financing costs, investors calculate investment returns, and management regulates the macro economy. Objectively speaking, A generally recognized benchmark interest rate level is required for reference.
Extended information:
Benchmark interest rate characteristics
1. Marketization. This is obvious. The benchmark interest rate must be determined by market supply and demand, and not only reflect the actual market supply and demand conditions, but also reflect the market's expectations for the future;
2. Fundamental. The benchmark interest rate occupies a fundamental position in the interest rate system and financial product price system. It has a strong correlation with the interest rates in other financial markets or the prices of financial assets;
3. Transmission. The market signals reflected by the benchmark interest rate, or the regulatory signals sent by the central bank through the benchmark interest rate, can be effectively transmitted to other financial markets and financial product prices.
Baidu Encyclopedia-Floating Interest Rate