Par Rate

A par rate is the fixed interest rate on a financial agreement, such as a mortgage or loan, where the initial value of the agreement is equal to its face value or loan amount. In other words, it’s the rate at which the present value of all future payments exactly matches the original loan principal, meaning no upfront gain or loss for the lender or borrower. It reflects a fair rate based on current market conditions, and is often used as a benchmark to compare different borrowing options or to price interest rate derivatives.