LIBOR rate on loans

erdingtonjohn

We have a second mortgage on our house taken out some 7 years ago.

In 2007 the provider wrote to me saying our monthly payment was increasing not because of the interest rate (as that was falling) but due to the LIBOR rate and the fact it was costing them more to borrow money.

I checked my T&C's and they had infact got this clause in them.

This annoyed me and still does.

We are left wondering today, if this whole scandel going to lead to some sort of compensation for us ripped of consummers? Do I stand any chance of getting the near on £1500.00 back I have had to pay due to this increase in the libor?

[Deleted User]

libor is the "london interbank overnight borrowing rate" i.e. the rate banks charge each other to borrow money over a very short period,using it to adjust long term interest rates seems at best iffy,perhaps you should approach them in light of recent events

dealer_wins

The Libor rate may have been driven lower, so you may have to pay your mortgage company £1500 in compensation OP!!

Eonel

Dealer Wins is right. LIBOR shows the rate at which banks lend to each other. So when compared with other interest rates it is a representation of the risk of banks failling. During the credit crunch, LIBOR shot up as many banks did fail or were nationalised.

The vast majority of manipulation of LIBOR was to drive it down. To make sure Barclays did not appear to be at higher risk of failure than any other bank.

Before the credit crunch there were attempts to manipulate the rates upward as suited individual dealers situations. But this is a small minority of cases and in general you will have profited from the deceit.

opinions4u

erdingtonjohn wrote: »

In 2007 the provider wrote to me saying our monthly payment was increasing not because of the interest rate (as that was falling) but due to the LIBOR rate and the fact it was costing them more to borrow money.

LIBOR and the Bank of England base rate are two different rates. They are independent of each other and can move in opposite directions.

LIBOR is actually more closely aligned to the rate lender's pay to raise funds to pass on to borrowers such as yourself. Another point to consider is that each lender raises funds at a premium rate over and above LIBOR. For example, in the good times the premium rate was low, usually a fraction of a percent. In the bad times, for a struggling lender, this premium could be several percent.

I checked my T&C's and they had infact got this clause in them.

This annoyed me and still does.

It really shouldn't annoy you that when you enter into a variable rate loan agreement that the lender subsequently varies the rate. It's all too predictable.

We are left wondering today, if this whole scandel going to lead to some sort of compensation for us ripped of consummers? Do I stand any chance of getting the near on £1500.00 back I have had to pay due to this increase in the libor?

If you're referring to the Barclays situation you will owe the lender money with this sort of thinking. They (apparently) nudged their LIBOR rate down.

erdingtonjohn

My partner has gone through the paperwork and we took the loan in September 2005. Looking at historical information the libor rate was 3.8584 in comparison to todays 0.2432. At the time of the letter the rate was 5.49.

The interest on the loan amount is fixed for the duration of the loan.

Obviously the clause on the T&C's cover them for the libor. But as the rate has fallen, am I just indemnifying the provider as it is costing them more money for the companys own credit situation. The company has never reduced my payment amounts when the libor fell.

broad-sword_2

If it comes to compensation then there is a long queue of savers in front when it comes to being robbed with interest rates of any sort.

Tixy

In your first post you said you had a letter to say your payment was increasing.
In your second post you say the interest on the loan was fixed for the duration of the loan.

Those statements seems to contradict each other.

The company has never reduced my payment amounts when the libor fell.

Tracker rates go up and down with the interest rate on which they are based (usually bank of england base rate for personal mortgages, athough sometimes it can be on one of the LIBOR rates).
Variable rates are not the same as tracker rates. There is no obligation for a variable rate to track a base interest rate.