Forward rate

Definition

Forward rate in plain English

A forward rate is an interest rate you nail down today for a loan that won't even start until some point in the future. Think of it like locking in next year's phone-plan price now, so you're not at the mercy of whatever rates happen to be then. Lenders and borrowers use it to remove the guesswork about future borrowing costs. It's set by looking at today's rates for different time lengths and working out what rate is implied for the future stretch between them.

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