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:
Download our Free First Time Buyers Guide
Recent posts
On the 31st October 2024 stamp duty for those purchasing additional properties increased by 2% from 3% to 5%.
From 1st April 2025 the threshold will be reducing from £250,000 to £125,000
Where did Londoners move to in 2024?
5 days ago
Research from Metro shows that those who chose to move home didn’t actually move that far away. With a 430g pack of chicken costing on average almost double in London than the rest of the UK, it's no wonder some people are choosing a change of scenery to save a few pennies.
Reasons to get a Buy to Let Mortgage
9 days ago
Following recent changes in the Buy to Let market, some investors may find this product less appealing. However, if done correctly, building a buy to let portfolio can be very profitable.
Stamp duty: how is it changing in 2025?
22 days ago
Helping you understand the upcoming changes in stamp duty (SDLT) from April 2025.
UK homebuyers and homeowners are hoping for stability in 2025.
We are hoping that mortgage rates will ease this year, but how drastically depends on inflation trends, swap rates, and the Bank of England’s decisions in which way the base rate should go.
Budgeting over the Christmas Period
3 Dec 2024
The most wonderful time of the year can easily turn into the most expensive time of the year. Watching the pennies doesn’t mean that the Christmas festivities have to stop, following a few budgeting tips can mean you still have a special Christmas and don’t go into the new year in debt.
Preparing your home to sell in winter
29 Nov 2024
December is usually a less desirable time to buy as many people don’t want to move over the holidays. However, prospective buyers do start to look at this time. Selling your home in winter may require a bit of extra attention to showcase your property at its best.
We look at why mortgage rates increased following the Bank of England's choice to reduce the bank rate, and should you fix now?
More information
Trusted by
