# Stable Interest Rate Model

<figure><img src="/files/LTbVe7rCHE5MNdIY9g7g" alt=""><figcaption></figcaption></figure>

In certain market conditions, Mutuum may allow stable rates for borrowers who prefer predictable repayment costs.

* **Initial Rate Lock**: A stable interest rate is calculated at the time of borrowing, typically starting as a weighted average of the current variable rate, along with other market indicators.
* **Higher Starting Rate**: Since borrowers gain the benefit of rate predictability, the stable rate is usually higher than the initial variable rate would be, compensating for the reduced risk of future interest rate hikes.
* **Rebalancing Condition**: Stable rates may be subject to rebalancing if market conditions change drastically. Specifically, rebalancing could be triggered when the current supply rate is at or below 90% of the variable rate that would apply if all borrows were variable. In effect, if the market variable rate becomes significantly higher than the stable rate, the protocol can increase the borrower’s stable rate to avoid an overly generous gap. Example of a Rebalance Criterion: Current supply rate ≤ (Supply rate if all borrows are variable) × 0.9. If the variable rate outpaces the existing stable rate beyond a certain margin, the protocol rebalances to maintain fairness and protect its liquidity. Not all tokens qualify for stable borrowing. Highly volatile or low-liquidity assets pose an elevated risk to the protocol, making stable-rate borrowing unsuitable.


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