A Forward Rate Agreement (FRA) is a financial contract that enables property developers to fix an interest rate now for borrowing or lending over a future period. It protects against rising interest rates on development loans by locking in the cost of capital in advance. In property development finance UK, FRAs are commonly used to hedge interest rate risk, ensuring predictable finance costs over the project timeline. The contract settles the difference between the agreed rate and the actual market rate at the future date, minimising uncertainty in interest payments.
This sits beneath Hedging & Interest Rate Risk Metrics, introducing a more specific variant of the measure without changing its core interpretation. It is commonly considered alongside Swap Rate (Swap Spread), as both are closely related measures used to assess similar aspects of performance or risk.
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