LIBOR stands for London Interbank Offered Rate.
It is the level of interest that banks use when lending to each other and LIBOR is set every day in London by the British Bankers Association.
Whilst LIBOR is set daily, there are different rates for different maturing periods from next day (known as the overnight rate) to a loan period of 6 distant. Each rate is set daily. On top of this, there are 15 different currencies in which monies lent are subject to LIBOR including the main economies such as USA, Euro, The Pound Sterling, etc.
A LIBOR mortgage is usually set to the 6 month LIBOR rate and an additional % rate will be added to this LIBOR rate. This is generally the rate the borrower would pay.
For example, if you wanted to calculate your LIBOR rate you first need to establish which rate you are borrowing on. In the UK, for mortgages, this might be the 6 month Sterling LIBOR. Your mortgage might state that you will be paying a low rate of say 2.15% and that after 18 months it will revert to 2% above LIBOR. Therefore, at the end of the fixed rate period, if LIBOR on that day for your loan currency is say 1.035, then you would be charged interest at a new rate of 3.035 (2% + 1.035%).
LIBOR is the rate at which banks lend to each other and is only usually used for mortgages which involve an element of business lending. Of course, this is all dependent on the rate used for your loan and the terms of your loan. Therefore, it’s wise to take advice before entering into a new loan.
Contact Mortgage Required to speak to a mortgage adviser on 01628 507477.
Related articles:
Data shows landlords could miss out on green mortgages due to expired energy performance certificates.
Buying a house is a big deal, and where you are planning to buy will make a difference financially. In this short blog, we look at the most affordable and most expensive areas and how much you need to be earning to buy in there.
10 days ago
Equity release is a type of mortgage that allows homeowners 55 and over to access money from their property's equity without having to leave their home. This is done by securing a loan against the house which is usually repaid by selling the property when the borrower passes away or has to move into long-term care.
11 days ago
It’s important to ask questions about the property you are interested in before taking that step to make an offer. A little probing can make all the difference between buying your dream house or something that requires a lot of work.
14 days ago
There are millions of homeowners over the age of 60 who are likely to release money from their homes to pay for their lifestyle during retirement giving those who are 'asset rich but cash poor' a way to live out their retirement the way they wish.
21 days ago
The average age of a first-time buyer in the UK is two years older than 10 years ago. This is understandable with managing the cost-of-living and challenges within the economy such as high interest rates making it difficult to get onto the property ladder.
23 days ago
Skipton Building Society launches ‘Delayed Start’ mortgage meaning first time buyers won’t be required to make repayments for the first three months.
According to a survey by Skipton, first time buyers who bought their home in the last five years found that in the first three months of living there, they were spending upwards of £30,000.
28 days ago
If you have recently moved into a property with a garden that requires a little TLC, or you’d like to get on top of your current green space, check out our tips.