LIBOR Rate???

Madfish

Hi, can anyone explain to me what the LIBOR rate is as I recently took out a new mortgage loan and had my 1st months payment taken out in september, now this month its gone up £35 apparantly due to the LIBOR rate???

Now I understand that I get rises when the bank of england puts up the interest rate but i've never heard of this before, and am wondering if it will go down as well as up as according to the letter its due to 'recent money market volatility', i'm with GMAC btw.

Thanks in advance...

Altarf

http://en.wikipedia.org/wiki/LIBOR

Madfish

so has anyone elses mortgage gone up due to this? no one i asked has had theirs go up, just seems like GMAC scamming a bit more £

Altarf

Depends what sort of mortgage you have. If you have one linked to LIBOR then of course it will vary.

Conrad

Many of the sub prime mortgage companies and loan companies are linked to the LIBOR rate. This is the rate Banks lend to one another at, problem is Banks have lost trust in one another due to the high levels of arrears in US and now UK mortgage and loan books.

Put simply, no one wants to lend to anyone other than prime clients able to prove income. As such rates have risen.

This is a key reason some of us think property prices have to fall, - many people cant afford the loans so the money supply reduces.

MarkyMarkD

It's rather concerning that you bought this mortgage without understanding what the rate basis was, Madfish.

It would have been pretty obvious from the Key Facts Illustration that the mortgage rate was linked to LIBOR, or that it was variable at the lender's discretion, rather than being linked to the Bank of England base rate.

GMAC fund their mortgages 100% from the money markets so their costs of borrowing are directly linked to LIBOR. It is fair enough that the rates they charge are linked in this way.

I wouldn't be surprised if more lenders start offering LIBOR-linked products in future as the BoE base rate is frankly irrelevant to mortgage pricing - the only reason it's used is that it's easy for mortgage borrowers to understand.

Suziestone

Madfish wrote: »

so has anyone elses mortgage gone up due to this? no one i asked has had theirs go up, just seems like GMAC scamming a bit more £

Hi, Madfish we are also with gmac and we recieved our letter mid september telling us the LIBOR rate has gone up with effect from 1st october! (Not a lot of notice given there!) I also wondered why no mention of this rise anywhere else.

NSR2

Suziestone wrote: »

Hi, Madfish we are also with gmac and we recieved our letter mid september telling us the LIBOR rate has gone up with effect from 1st october! (Not a lot of notice given there!) I also wondered why no mention of this rise anywhere else.

At the risk of blowing my own trumpet:
http://forums.moneysavingexpert.com/showthread.html?t=534283&page=3&highlight=NSR2
My comment is quite far down, but I've put there everything I know about IRs (some of it may even be correct )

Suziestone

NSR2 wrote: »

At the risk of blowing my own trumpet:
http://forums.moneysavingexpert.com/showthread.html?t=534283&page=3&highlight=NSR2
My comment is quite far down, but I've put there everything I know about IRs (some of it may even be correct )

Thanks for that. Its the first time I have actually kinda understood it all. :A