The interest rate linked to some of our customers’ mortgages is currently calculated with reference to the London Interbank Offered Rate (LIBOR), which is due to cease in its current format after 31 December 2021. Thereafter, we currently anticipate switching all our mortgages to track the Bank of England Base Rate (BBR) as the alternative reference rate. Should regulatory guidance change prior to the cessation of LIBOR in such a way to make it inappropriate to use BBR as the alternative reference rate, another alternative reference rate may be used.
We will continue to keep our customers informed:
Since May 2020, all new Foundation Home Loans products, including Product Transfer products, have been based on or revert to an interest rate which refers to Bank Base Rate (BBR).
LIBOR is the London Interbank Offered Rate which is the rate at which banks lend money to each other and is commonly used as a benchmark reference interest rate by which reversion rates on mortgages are calculated.
Globally, use of the interbank offer market, which IBORs including the London Interbank Offer Rate (LIBOR) reflect, has reduced since the financial crisis in 2008. Consequently, it no longer provides a sustainable transparent indication of lending rates. LIBOR is therefore no longer a suitable benchmark by which to set interest rates for mortgages. This decision has been made by the financial regulators and all banks, lenders and financial institutions will be moving their customers to an alternative reference rate.
Use of LIBOR is expected to cease at the end of 2021 and firms are being encouraged by regulators to transition existing mortgage accounts to be calculated against an alternative reference rate. Before that deadline, we will be taking all reasonable steps to ensure a smooth transition for any borrowers whose mortgage reversion benchmark rate is affected. This will include contacting affected borrowers closer to the time to inform them of:
The structure of a rate is shown on the original mortgage offer. Some variable mortgages like Tracker mortgages reference LIBOR, and the reversion rate on some mortgages reference LIBOR.
If your clients are on a fixed rate, the initial rate will not be affected. Only the follow-on reversion rate will be impacted.
No. We no longer offer LIBOR referencing rates. All of our new mortgages refer to Bank Base Rate BBR.
Financial Conduct Authority https://www.fca.org.uk/markets/libor