Variable Rate Products
and the Federal Reserve

Frequently Asked Questions

What is the U.S. Prime Rate?
The U.S. Prime Rate is published in the Wall Street Journal and is the primary interest rate used by credit unions, banks and all other financial institutions.

How is the U.S. Prime Rate calculated?
The U.S. Prime Rate is approximately the Federal Funds Target Rate plus 3.00%. 

What is the Federal Funds Target Rate?
The Federal Funds Target Rate is the interest rate banks charge each other for overnight loans.

What is an Index?
Lenders determine a benchmark (index) to use when setting variable interest rates. This index (benchmark) is used to calculate the rates offered to borrowers. The U.S. Prime Rate mentioned above is an example of an index. Typically, the index is combined with a margin to calculate rates offered to borrowers. 

What Northwest Federal Credit Union loans are impacted if the Prime Rate changes?

  •  Home Equity Lines of Credit
  •  Lines of Credit
  •  Credit Cards

When will my rate adjust?

  •  Home Equity Lines of Credit - The rate will adjust on the first business day after the end of each quarter when the Prime Rate adjusts.
  •  Lines of Credit – The rate will adjust on the first business day after the end of each month when the Prime Rate adjusts.
  •  Credit Cards - The rate will adjust on the first business day after the end of each month when the Prime Rate adjusts.

How do I know if my rate may adjust?
This information is available in your loan documents and in online banking.

Which Northwest Federal loans are NOT directly impacted by a Prime Rate change?

 Any existing non-variable rate loans, including:

  •  Fixed-rate Mortgages
  •  Home Equity Loans
  •  Vehicle Loans
  •  Signature Loans
  •  Savings Secured Loans
  •  Any existing Adjustable Rate Mortgage (based on other indexes)

How high can my adjustable interest rate go?
The rate adjustments are capped by the Floor and Ceiling which are loan specific and outlined on the loan documents.

Where can I find out what my new interest rate is?
You may access your rate information through Online Banking. Additionally, the new rate will appear on future monthly statements. 

Can I change my loan to have a fixed rate?
While the Home Equity Lines of Credit, Lines of Credit and Credit Cards do not have a convertible option, you are welcome to explore alternatives including refinances with an NWFCU loan representative.