What Is LIBOR?
LIBOR stands for London Interbank Offered Rate. It’s the interest rate at which major banks lend to one another for the short-term in the international market.
Why is LIBOR important?
LIBOR serves as a well-accepted benchmark interest rate, based on which the interest rates for many other loans are decided. This not only impacts loans between banks and prices of many derivative products, but also impacts the interest rates on consumer loans like credit cards, car loans, student loans and adjustable or floating rate mortgages.
Is LIBOR a fixed rate?
No, it is calculated and published daily by the Intercontinental Exchange or ICE, based on loans of different maturities in 5 currencies. There are a total of 35 different LIBOR rates, but the most common is the three-month U.S. dollar rate. This rate is commonly called the LIBOR rate.
Why is London Inter-Bank Offered Rate used in the US? Doesn’t the US have something of its own?
Ha ha… Good question! LIBOR is planned to be phased out world-wide by 2021. So although it is used in the US right now, it would be replaced by the Secured Overnight Financing Rate or SOFR. But that’s a topic for another time…
Podcast: What Is LIBOR (London Interbank Offered Rate)
Fun, informative and concise episodes by a 10-year old, breaking down complex financial concepts in a way that kids and beginners can understand. Episodes cover personal finance topics like saving, investing, banking, credit cards, insurance, real estate, mortgage, retirement planning, 401k, stocks, bonds, income tax, and more, and are in the form of a conversation between a cowboy (a finance novice) and his friend, a stock broker. Making finance your friend, only at Easy Peasy Finance.
A little bit about me: I have been fascinated with the world of personal finance since I was 6! I love to read personal finance books, and keep myself updated on the latest by reading various personal finance magazines. My friends often ask me questions about finance because they find it complex and intimidating. That’s what inspired me to start my YouTube channel called Easy Peasy Finance when I was 8, and this podcast 2 years later.
All you need to know about LIBOR or London Interbank Offered Rate: What Is LIBOR, Why is LIBOR important, Is it a fixed rate or changes from time to time, Why is London Inter-Bank Offered Rate used in the US, Does the US have some similar benchmark of its own, and more.
Show notes and transcript at: https://www.easypeasyfinance.com/what-is-libor-london-interbank-offered-rate/