Libor

rlouisa

wot in GOD's name is a libor.....my mortgage company has upped interest rate to 9.10% from 5.9 under 2yrs and the guy says its libor? really didnt understand wot he was on about.the only thing i understand is my interest only mortgage has shot up from £700 to £1700 under 2yrs...... they dont follow the bank of england rate but this libor thing.someone plssssssssssssssssssssssssssssss explain this to me.i have 1 more grusome yr wit theses ppl and i have this dreadful feelin i wont make it

Hoario54

The London Inter-Bank Offered Rate which is normally used by Sub Prime lenders to base their Standard Variable Rate on and is traditionally 1 - 1.5% higher than the Bank of England Base Rate.

You're not the first and you certainly won't be the last person that the credit crunch is going to hurt but anyone on a variable rate linked to LIBOR better hold on tight.

No UK sub prime problem my rear end...

Leon_W

London InterBank Offered Rate

Basically it is the rate that Banks lend to each other at, and as you are now well aware, it can be a bit of a !!!!!!.

The recent problems have seen liquidity in the market dry up with the consequence that banks are now paying more for the money that they lend you , so this cost then gets passed on to you.

WTF?_2

It's worth mentioning that the reason LIBOR has suddenly become an issue is because the central banks have effectively 'lost control' of interest rates.

They have kept interest rates for too low, for too long that massive problems of lax lending have developed. Not really surprising when the government was 'printing money' and holding interest rates low.

This has resulted in a lot of loan defaults (mostly mortgages in the US). Normally the companies that issued the loans would simply have gone bust. Problem over.

However, the clever Americans 'securitized' the mortgages and made them into little packages called 'CDOs' that they sold on to financial institutions around the world. Basically: Banks, pension funds, hedge funds and other money market players throughout the entire World bought the rights to the income generated from the debt obligations of the people who took out (mortgage) loans.

Now that increasing numbers of people aren't paying back the debts, those who bought the CDOs are finding that they are in fact, worthless. Some organisations could be holding hundreds of millions of dollars worth of debt, bought as investments.

As a result, people are being very cagey about lending money to each other. No-one knows who is exposed. Many organisations don't know even how much they have lost. Therefore they're keeping the money in case they need to make the obligation good to their customers/creditors.

This means that any organisation that wants to borrow money on the financial market has to pay quite a bit more than the official interest rate. The exact rate that they pay depends on the deal and a statistic called LIBOR is produced which lists the current average rate that banks charge each other.

Many organisations which lend money actually do so by borrowing on the international financial market and not from loaning from money they hold from investors and savers as most people assume.



Now, if the people who lend us money are having to pay more for it on the market - what does that mean for the rates they charge us? That's why LIBOR is suddenly an issue.

It doesn't matter than The Powers That Be decide that interest rates should be lower to keep the bandwagon rolling, the actual market has determined that the real rate of interest is xxx regardless of what the chairman of the the Federal Reserve or the Bank of England says......

maninthestreet

rlouisa wrote: »

wot in GOD's name is a libor.....my mortgage company has upped interest rate to 9.10% from 5.9 under 2yrs and the guy says its libor? really didnt understand wot he was on about.the only thing i understand is my interest only mortgage has shot up from £700 to £1700 under 2yrs...... they dont follow the bank of england rate but this libor thing.someone plssssssssssssssssssssssssssssss explain this to me.i have 1 more grusome yr wit theses ppl and i have this dreadful feelin i wont make it

Your figures don't add up - your interest-only monthly mortgage payment has increased almost 2.5 times, but the interest rate has only gone up by just over 1.5 times.

padders_2

Perhaps it has gone from i.r to repayment as well, would add up then I believe.

rlouisa

wow....mind bugling this!! i think this should be explained initially, cos after the conversation with the confusin mortage guy, i went to read or should i say skimm thru the mortgage documents lookin for the word 'libor' but couldnt find it anywhere....shouldnt that be mentioned? or should one just assume when a company offers a 'variable interest rate, oen should assume there could be a 'libor' lurkin around somewhere in the small print?or no print? cos i couldnt find dat word anywhere!! mayb i should resort back to being a homemaker and not a home owner!!

maninthestreet

You still havent explained how your interest-only mortgage payments have gone up 2.5 times, whilst the interest rate on your mortgage has only gone up 1.5 times.

jubblyjimbo

If you've had your mortgage for a while then presumably the value of your house will have risen, and you'll have a bit of equity. Can you re-mortgage with a different lender at a lower rate?

rlouisa

maninthestreet wrote: »

You still havent explained how your interest-only mortgage payments have gone up 2.5 times, whilst the interest rate on your mortgage has only gone up 1.5 times.

dats the whole basis of this post......i asked the mortgage lender and he said it was libor! the place another 2% above BOE base rate .so dats why im here tryin to find out wot its all about from u good ppl. the original mortgate lender was kensigton but they sold us to these new ppl, i forget their name.:rolleyes:

Zammo

rlouisa wrote: »

dats the whole basis of this post......i asked the mortgage lender and he said it was libor! the place another 2% above BOE base rate .so dats why im here tryin to find out wot its all about from u good ppl. the original mortgate lender was kensigton but they sold us to these new ppl, i forget their name.:rolleyes:

Nice trolling. :money: