Interest rate risk products

We offer a range of flexible tools to help manage interest rate risk and cash flows relating to borrowing facilities. Managing interest rate risk can provide both protection and opportunity. Protection against nominated worst case scenarios and adverse interest rate movements can save money and give more certainty for management and budgetary purposes. However, there's also the opportunity to benefit from favourable rate movements enabling lower costs and ultimately increase in profits.

  • Swaps

    A Swap is an agreement between your company and Bendigo Bank to exchange interest payments for an agreed period of time. It is a powerful tool to hedge against rising interest rates. There are always two legs to a Swap, the fixed leg and the floating leg. The customer pays Bendigo Bank a fixed rate of interest on a notional principal amount while Bendigo Bank pays the customer a variable rate of interest on the same amount. Under a Swap agreement no principal is exchanged, only the interest payments. There is no fee payable for a Swap, the price is purely the fixed rate paid by the borrower. The parameters of a Swap are customised to suit the particular customer's needs. The main parameters are the start and end dates of the Swap, the notional principal amount on which interest is calculated and the frequency of the interest payments. When these parameters are matched to a customer's variable rate loan the effect is to hedge their exposure to interest rate moves; the borrower ends up with a net fixed rate exposure.

  • Caps

    Taking out a Cap ensures the interest rate on the borrower's variable loan will not go above the specified Cap rate. There is a premium payable to purchase the Cap which depends on several factors including the loan amount, Cap rate relative to current market rates, fixed rate term, repayment frequency and interest rate volatility. When a borrower purchases a Cap they continue to receive the full benefit of any variable rate decreases on your loan, at each rollover date.

  • Collars

    A Collar is a combination of an Interest Rate Cap ("Cap") and an Interest Rate Floor ("Floor"). Taking out a Collar ensures the interest rate on the borrower's variable loan will only float within the band set by the Cap and Floor rates. This provides protection against interest rate increases above the Cap rate but also means that the borrower forgoes the benefit of any decreases below the Floor rate, at each rollover date. The purpose of adding the Floor is to reduce the cost in comparison to buying a Cap only. The premium payable to purchase the Collar depends on several factors including the loan amount, Cap and Floor rates relative to current market rates, fixed rate term, repayment frequency and interest rate volatility. It is possible to set a Cap and Floor combination to produce a zero cost Collar.

  • Forward Start Option

    A Forward Start Option gives a borrower the right without any obligation to borrow on a specified date in the future at an agreed fixed rate. There is a fee payable to purchase the Forward Start Option which depends on several factors including the loan amount, Forward Start Option rate, time to settlement, fixed rate term and repayment frequency. The borrower is able to choose the level at which the Forward Start Option rate is set, the lower this rate is the higher the fee will be.

  • Deferred Start Fixed Rate

    A Deferred Start is an agreement between a borrower and Bendigo Bank to borrow on a specified date in the future at an agreed rate. After entering into the Deferred Start agreement the borrower is obliged to borrow on the arranged terms. There is no fee for obtaining the Deferred Start (standard lending fees and charges still apply). The differential between the current rate and the Deferred Start rate is influenced by a number of factors including the time until settlement of the loan and the market's expectations for interest rates.