LIBOR drops – but will loans?

13 November 2008

LIBOR (the London Interbank Offered Rate) is the average rate banks charge each other for loans – and it`s falling steadily.

This year, thisismoney.co.uk reports, the three-month sterling LIBOR rate started off at around 5.5%. In late September, it peaked at 6.3%, but since then it has kept on dropping:

• on 10 November, it was 4.42%; • on 11 November, it was 4.38%; • on 12 November, it was 4.31%; and • today it fell to 4.2% - just 1.2% above the base rate.

Loan providers tend to look at the LIBOR rate when they`re calculating how much to charge for loans to consumers. So this steady drop is good news for anyone looking for a loan – or at least it could be, as loan providers aren`t actually obliged to reduce the cost of their fixed-rate or variable loans.

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