Interest rate guarantee


An interest rate guarantee is an option on a forward rate agreement that is handled over-the-counter.
A call IRG is called a borrower's IRG or borrower option.
A put IRG is called a lender's IRG. As with all options, the seller has the obligation to fulfill the condition of the option.
  • When exercising a borrower's IRG, the holder has the option to take a loan with a predetermined amount at a predetermined interest rate on a predetermined time period.
  • When exercising a Lender's IRG, the holder has the option to make a loan with a predetermined amount at a predetermined interest rate on a predetermined time period.
In the residential mortgage industry, an interest rate guarantee is also called a locked in rate.