What is LIBOR?

LIBOR stands for the London interbank offered rate and is the rate of interest that banks charge to lend money to each other. The LIBOR rate is set daily by the British Bankers' Association (BBA) who work with a small group of large banks to set the LIBOR rate. The wholesale markets allow banks who need money to be more fluid in the marketplace to borrow from those with surplus amounts. The banks with surplus amounts of money are keen to lend so that they can generate interest on the loans which it would not otherwise receive.

Currently the focus is on the 3 month LIBOR rate which would normally run at 0.15% and 0.25% in advance of where the markets believe the Bank of England Base Rate (BBR) will be in 3 months time. Recently however, this figure has been significantly higher. This is because the banks are unwilling to lend to each other in such a volatile market but at the same time the demand for money is high, which pushes the LIBOR rate up as a result. As we recently reported on our Buy to Let blog, the rate has started to drop back down which is good news for the mortgage market because if it is costly for banks to borrow money from each other then this cost gets transferred to the consumer.

You can keep up to date with the LIBOR rate and movements on our money markets and Buy to Let blog pages. We'll give you the latest information and how we feel it will effect the UK housing market, rental market and buy to let mortgages as a whole.

3M LIBOR v Base Rate

By clicking on the graph below you can see how 3 month LIBOR has compared to the Bank of England Base Rate.