No exchange of principal occurs, only the difference between prevailing market interest rates and the FRA agreed interest rate is exchanged.įAQs about FRAs for Borrowers. As borrower this allows you to lock in the rate of your borrowing rather than be at the mercy of the markets. Forward Rate Agreements are agreements between the bank and borrower in which the bank agrees to lend the borrower at an agreed certain interest rate on a nominal principal at a time in the future.Īt the same time the borrower agrees to pay the bank the Bank Bill Reference Rate (BBSW) on the same nominal principal.
