A US LIBOR linked mortgage - what's that?

Question

I'm looking at a mortgage that Charcol describe as: "Exclusive 2.99% Fixed then Tracker - 2.99% Fixed rate until 30/09/04, then US 3 month LIBOR rate plus 1.25% until 30/09/14, UK 3 month LIBOR plus 1.25% thereafter" AFAICS the US LIBOR is some kind of financial index which is currently sitting at about 2%. The headline APR rate Charcol are using to plug the above mortgage is 3.5% which is scorchingly low but this US LIBOR (whatever it is) wouldn't have to rise far for it to not seem like such a great deal. So.. can anyone briefly explain the US LIBOR and the prospects for it to rise in future? Ta..

john boyle · Accepted Answer

In message , Abso writes

1) if you dont understand it, then dont take it (no offence intended)

2) The generic concept of US LIBOR is just the same as UK LIBOR except that one is the US rate and the other is the UK rate.

3) LIBOR is the wholesale rate of money set between banks in London. It is expressed as an interest rate.

4) The '3 month' rate has a very close correlation to the Central banks base rate for the curremcy concerned, i.e for £ = BoE for $ = Fed Res.

5) if you think US LIBOR is a marketing index then avoid it

6) in these cases the APR is largely irrelevant because the base rate used will act independently of UK rates, the APR assumes that present rates will remain constant (which they wont)

No offence intended but if you needed to ask these questions then you should avoid it

hew_dunnit · Answer

See

LIBOR = London Interbank Offered Rate.

Can there be a US LIBOR? Or is that the dollar conversion of LIBOR?

If you go down that path, just make sure that it is the LIBOR rate you're being offered and not some 'Shittybank' interpretation of it.

john boyle · Answer

In message , hew_dunnit writes

Of course there can.

No, its the rate UK banks lend US dollars to one another and is expressed as an interest rate. It used to be called 'eurodollar's but I dont think that term is used these days.

A US LIBOR linked mortgage - what's that?

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