What is the LIBOR Rate?
LIBOR stands for “London Inter-Bank Offered Rate.” It is based on rates that contributor banks in London offer each other for inter-bank deposits. From a bank’s perspective, deposits are simply funds that are loaned to them. So in effect, a LIBOR is a rate at which a fellow London bank can borrow money from other banks. Rate calculations are complex as they incorporate variables such as time, maturity and currency rates. There are hundreds of LIBOR rates reported each month in numerous currencies. We report the 12 Month LIBOR on or after the first of the month. This is the LIBOR for a twelve month deposit in U.S. Dollars on the last business day of the previous month.
Note: Rates published prior to July 2007 reflect the Fannie Mae LIBOR rate which used a different calculation. Fannie Mae discontinued its use and publication of LIBOR rates at the end of June 2007 and suggested a replacement rate using our current methodology, which is similar to the Wall Street Journal LIBOR (WSJ LIBOR).
1 Year LIBOR
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Source: Fannie Mae, British Bankers’ Association
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