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:
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.
2 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.
7 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.
10 days ago
High street lender, NatWest, have launched a new product to help first-time buyers purchase a property with assistance from a family member or friend to get them on the property ladder sooner.
11 days ago
‘Buy Now, Pay Later’ (BNPL) schemes, such as ‘Klarna’ are short-term loans that allow shoppers to make a purchase, but delay paying for it for an agreed amount of time.
Klarna is one of the most popular BNPL services with 18 million customers in the UK alone, and offers interest-free payment options which is appealing to shoppers. However, does it affect a mortgage application?
16 days ago
We look at how to get the best Buy to Let mortgage rate, what's in store going forward, and options as a landlord with increasing costs.
25 days ago
Throughout this past week, lenders have continued to reduce their mortgage rates giving borrowers in the UK some welcome news following the change in global tariffs under US President, Donald Trump.
25 days ago
Did you know that buying a house, or relocating is in the top 10 most stressful life events?
Stress of course is an unavoidable part of life and there are many reasons why people experience stress, not just buying a house!
There are lots of effective ways to manage and reduce stress, check out our tips to help you.