LIBOR Remortgages
LIBOR is used by some lenders as their base lending rate instead of using a Standard Variable Rate. Lenders usually review the LIBOR rate as their base lending rate on a quarterly basis.
What are LIBOR Remortgages
LIBOR referrs to the term: London Interbank Offered Rate.
The LIBOR is the rate at which banks buy and sell money to each other. The LIBOR varies day to day and is closely linked to Base Rate.
The LIBOR and Base Rate are interlinked and can give an indication of the future direction of base rates. For example if the LIBOR is above base rate, it indicates that the money market believes interest rates are about to increase and visa versa.
LIBOR-linked Remortgages
A remortgage linked to theLIBOR is charged at a margin above the Interbank rate (typically 1 to 1.5%) the rate is equally likely to be reset quarterly.
Advantages of LIBOR Remortgages
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LIBOR linked loans offer the customer the opportunity to pay a rate closer to the true cost of money
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In times of low interest rates, the borrower is likely to encounter lower overall payments
Disadvantages of LIBOR Remortgages
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LIBOR rates tend to be more volatile than variable mortgage rates as the rate payable will change almost every quarter
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In time of high interest rates, the borrower is likely to encoutner higher overall repayments