Libor v Base Rate

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    Libor v Base Rate

    My present bank only lends on Libor. I've taken my last 3 mortgage out with them on Libor + 3.25%
    Is this risky?

    I found this on the pimco website:
    SOFR and other alternatives to Libor: recent developments

    Over the past year, industry leaders and regulators have articulated tangible steps to implement alternatives to Libor, laying the foundation for markets to reference and build liquidity around them.

    Public-private working groups in each regional jurisdiction nominated alternative reference rates: overnight funding rates that reflect the majority of funding activity. In the U.K. the unsecured SONIA (Sterling Overnight Index Average) rate was selected; it already sees robust derivative liquidity and market pricing.

    Your bank ( if under UK Jurisdiction ) should inform you if it will be changing to SONIA or switch to some other rate.


      If your question was about the interest rate Libor +3.25%, Libor rate ( for 3-6 months ) is currently about 0.905 %.

      So you are paying approx 4.2% interest rate and I would expect you get notification of new rate from the bank.

      If you can change to a 5 years fixed rate mortgage, you may be able to save a lot of money on interest charges :


        Libor as it existed was always slightly higher than Bank Rate, anything between 0.2/0.5 above Bank Rate. The only slight benefit/ adverse feature of Libor was that the rate was set every three months and therefore would result in either having a short term benefit or adverse effect on mortgage payments whereas BR was immediate.
        As Gordon has reported there is now a move to abolish Libor pricing using a different and hopefully more trusted and transparency as a mechanism in being quoted for lending or using a Lenders Standard Variable ratewhich is an arbitrary Rate .
        Where existing lending remains linked to Libor then as Gordon correctly stated , lenders will give advance notice of any change to its pricing structure.
        I am assuming that you are now out of any Early Redemption penalty on your mortgage and if correct I would suggest you check to establish if your lender offers a loyalty switch rate if not explore what incentives are available for a Remortgage, certainly there are schemes which offer competitive rates below what you are currently paying with the advantage of No Valuation Fees and either a contribution towards Basic Legal Costs or providing a Fee Free Legal Facility, subject to you using one of their approved legal firms and in a minority of cases additional incentives.


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