Mortgage interest rates and LIBOR: information for borrowers

From 2022, the way interest rates are calculated for a small number of mortgages is changing. If you are affected your lender (or mortgage administrator) will contact you.

LIBOR is an interest rate benchmark used to calculate some mortgage interest rates. It is due to end in its current form by the end of 2021.  In future the interest rate for these mortgages will need to be calculated in a different way.

Why is this happening?

The aim of LIBOR is to measure the interest rate that banks borrow from one another. LIBOR relies on information about markets which will no longer be available from banks. Therefore, LIBOR is now not considered sustainable and is being phased out.

Banks that provide this information for LIBOR have agreed to keep doing so until the end of 2021. This will give lenders time to switch to alternative interest rates before LIBOR becomes unavailable.

Do I have a mortgage which uses LIBOR to calculate my interest rate?

Most mortgage interest rates are not calculated using LIBOR. If you do have a mortgage that uses LIBOR, your lender will tell you. You may also be able to tell this from your mortgage documents, such as your mortgage offer, or mortgage terms and conditions.

What does the end of LIBOR mean for my mortgage?

If your mortgage uses LIBOR, your lender may need to amend its terms and conditions to change the way the interest rate is calculated. If so, they will tell you about this. They may also ask for your consent to make these changes.

There are several ways your lender might change the interest rate calculation. For example, they may choose a different rate to reference, such as the Bank of England base rate. We have told firms that when replacing LIBOR with an alternative rate, they should ensure that they are treating consumers fairly.

What happens if your mortgage isn’t moved onto a different rate?

Despite lenders’ efforts to replace LIBOR in mortgage contracts, there may be some cases where this doesn’t happen before the end of 2021. We will consult on providing a temporary solution for certain products, which may include mortgages, that have not changed by that time. As this will be a time-limited solution, it is still important to respond to your lender when they contact you.

How do I get more information about this?

Contact your lender if you have any questions about your mortgage.