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A mortgage banker's fixed rate loan commitment to potential borrowers is an option for the borrowers at the committed rate. If rates rise, more borrowers will use the option, forcing the mortgage banker to make below-market rate loans and sell them at a loss. This risk is called

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This risk is interest rate.

  • The risk of changes in interest rates (in the US or other global markets) lowering (or raising) the market value of a bond you own is known as interest rate risk.
  • The longer you keep a bond, the greater the risk associated with interest rates, commonly known as market risk.
  • The value of fixed-income assets is directly impacted by interest rate risk.
  • Due to the inverse relationship between interest rates and bond prices, when interest rates rise, bond prices fall and vice versa.

What is meant by interest rate risk?

  • The possibility that a change in general interest rates will lower the value of a bond or other fixed-rate investment is known as interest rate risk.
  • Bond prices decrease as interest rates rise and vice versa.
  • This means that the market price of existing bonds drops to offset the more attractive rates of new bond issues.

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