What is LIBOR?
LIBOR is an abbreviation for ” London Offered Rate ” LIBOR is used as a base index for setting rates of some adjustable rate financing instruments, including Adjustable Rate Mortgages ( ARM’S ). Loans tied to LIBOR are variable loans but they usually are very attractive because LIBOR is lower and some financial anaylsts are of the opinion that it may be more stable than the New York Prime Rate.While Gulfcoast has no such opinion, we offer this product as part of our full servicing of options available.
The London Interbank Offered Rate (LIBOR) is a daily reference rate based on the interest rates at which banks borrow unsecured funds from banks in the London wholesale money market (or interbank market). It is roughly comparable to the U.S. Federal funds rate. LIBOR can be defined as: The rate at which an individual Contributor Panel bank could borrow funds, were it to do so by asking for and then accepting inter-bank offers in reasonable market size, just prior to 11.00 London time. This definition is amplified as follows: • The rate at which each bank submits must be formed from that bank’s perception of its cost of funds in the interbank market. • Contributions must represent rates formed in London and not elsewhere. • Contributions must be for the currency concerned, not the cost of producing one currency by borrowing in another currency and accessing the required currency via the foreign exchange markets. • The rates must be submitted by members of staff at a bank with primary re
