How does the LIBOR affect my mortgage?

mdavies1983

I took out a mortgate just under 2 years ago. At the time we were given a 2 year set interest rate of 6.99%, after which the interest will be 3.85% above LIBOR.

Obviously as the 2 year mark is almost upon us I'm taking more of an interest into how this actually works (especially as the low LIBOR rate at the moment means I'll be saving around £140 a month as it currently stands!)
:beer:

From my understanding, the LIBOR rate changes daily but for mortgage purposes is set quarterly on the 14th of March, June, September and December and as a result I'm assuming that would mean our mortgage payments would only change 4 times a year, is that correct?

Also, as our mortgage payments is set to the 1st of every month, would a change to the LIBOR rate take effect with the next payment, or with a months notice? (ie if the rate changes on 14th March, would this rate be used for the April 1st payment, or would it not take effect until May 1st?)

Any help would be much appreciated!