3 Month LIBOR (Reported Monthly) Definition
What is the LIBOR Rate? What is the LIBOR Index?
LIBOR stands for “London Inter-Bank Offered Rate.” This interest rate 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 in a particular currency. Rate calculations are complex as they incorporate variables such as time, maturity and currency exchange rates. There are hundreds of LIBOR rates reported each month in numerous currencies. We report the 3 Month LIBOR on or after the first of the month. This is the LIBOR for a three month deposit in U.S. Dollars on the last business day of the previous month. For instance, the reported rate for February is the rate published on February 1, reflecting the LIBOR for January 31.
Note: This monthly reported rate is a common index for adjustable rate mortgages using a LIBOR index. Prior to July 2007, the Fannie Mae LIBOR rate was published as a standard adjustable rate mortgage index. Fannie Mae discontinued the use and publication of its own LIBOR rates at the end of June 2007 and suggested the replacement rate index use this current methodology, which is similar to the Wall Street Journal LIBOR (WSJ LIBOR).
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