Research data

Money markets

All the latest money market information can be found here, including up-to-date SWAP rates and LIBOR rates. We'll also have commentary and views from our in-house experts.

Rates as at 6th December 2017


Bank of England Bank Rate: 0.50%

UK 1 month LIBOR: 0.49700%   -0.00069%
UK 3 month LIBOR: 0.52006%
   -0.00194%

(LIBOR figures provided by TheIce.Com, rounded to five decimal places. Effective 1st July 2014, real-time LIBOR rate information as calculated and published by ICE Benchmark Administration is liable to data charges. Licence-free display of LIBOR rates and swap rates on free access websites such as www.mortgagesforbusiness.co.uk is subject to a delay of 7 days. The latest LIBOR figures and SWAP rates are published by the ICE.)


UK SWAP Rate:

Year(s)

 Current Rate

 Change from 
previous day's rate

1

0.645%

<>

2

0.831%

-0.004

3

0.941%

-0.004%

5

1.090%

-0.005%

7

1.199%

-0.009%

10

1.331%

-0.011%

(SWAP rates provided by TheIce.Com, rounded to three decimal places.)


3 Month LIBOR v Bank Rate

August was an uneventful month for LIBOR, which continued its downward trajectory without major interruptions. In the first half of September, however, LIBOR began to increase, before jumping up 0.025% overnight between the 14th and 15th September after the MPC again held Bank Rate at its current record low. Since this sharp increase in LIBOR we have seen a continued, albeit gentle, rise into October.

The following graph gives an indication of how the 3 Month LIBOR Rate has compared to Bank Base Rate over the past 12 months.

The below graph shows the difference between Bank Rate and 3 Month LIBOR over the past 12 months. This is given as a negative value when 3 Month LIBOR has been below Bank Rate.

Historic SWAP Rates

August was another dull month for SWAPs but SWAP rates rose sharply around the time of September's MPC meeting, fueled by further comments from MPC members that increases to Bank Rate may be on the horizon. There is speculation among the markets that this may come in November, but the expectation at Mortgages for Business is that the MPC's November meeting will again see Bank Rate held at 0.25%. The sharp rise in SWAP rates has resulted in long term SWAPs reaching similar levels to those seen in early July, while SWAPs of five years or fewer all achieved higher rates by the 18th September than at any point in the previous twelve months. SWAP rates have continued to increase, because of further hints from the BoE that a rise in interest rates could be coming soon.

The following graph gives an indication of how the Swap Rates have moved over the past 12 months.

What is Bank Rate?

Bank Rate is the interest rate at which the Bank of England is prepared to lend short-term money to financial institutions. Also referred to as Bank Base Rate, it directly affects short and longer-term interest rates set by commercial banks, building societies and other institutions for their own savers and borrowers.

Bank Rate is set each month by the Bank of England's Monetary Policy Committee and the monthly decision is announced at 12 noon immediately following the meeting. Decisions are made on a one-person-one-vote basis, with the Governor having the casting vote if there is no majority.

By changing the rate of interest, the MPC is attempting to influence the overall level of activity in the UK economy and keep a healthy balance between supply and demand.

Reductions in Bank Rate usually occur when the demand for goods and services falls to such a level that unemployment rises and businesses start to close. Increases in Bank Rate usually occur when the demand for goods and services rises at a faster pace than can be supplied by the economy.

Bank Rate was reduced to 0.25% in August 2016, having previously been held at 0.5% since March 2009.

 

What are SWAP Rates?

SWAP rates are a mechanism through which lenders can acquire a fixed price for funding over a specific period of time, normally from 1 year to 10 years – although most commonly 2, 3, 5 and 10 year SWAP rate programmes are used as these are then used to create fixed rate mortgage products for homeowners, property investors and business mortgages.

SWAP rates will factor in what the money markets see as the likely average rate over the chosen time period and can sometimes be cheaper than the prevailing variable rate and therefore result in a product (by the time the lender has added a margin) that is not only attractive but also provides the borrower with certainty of mortgage costs over the chosen period.

Some lenders will have sophisticated SWAP rate money management programmes and will be in a position to run a rolling fixed rate programme – i.e. offering a fix from the day of completion whereas some will work to a fixed end date such as fixed to 31 Aug 2014 which is more transparent to monitor.

As with any market, traders will occasionally “make the wrong call” and fixed rates based on unknown future events can look dramatically attractive – simply the price appears “too good to be true”. If this happens, we recommend you check out the fees and any early redemption charges (ERCs) and if it still works, grab it before it goes.

 

What is LIBOR?

LIBOR stands for London InterBank Offered Rate and is the rate of interest that banks charge to lend money to each other. Each bank operating in the London market reports its own LIBOR for its cost of borrowing on the London market, and the rates reported by the larger banks are correlated by Ice Benchmark Administration (IBA)* on a daily basis to determine an overall market rate for LIBOR.

The wholesale markets allow banks which need money to be more fluid in the marketplace to borrow from those with surplus amounts. The banks with surplus amounts of money are keen to lend so that they can generate interest on the loans which they would not otherwise receive.

Historically LIBOR has run at between 0.15% and 0.25% in advance of where the markets believe Bank Rate will be in 3 months' time. This premium has fluctuated considerably in the period since the financial crash in 2008 but is currently around 0.06%.

 

*On 1st February 2014 Ice Benchmark Administration (IBA) assumed responsibility as the new administrator for LIBOR from the British Banker's Association (BBA). ICE works with a small group of large banks to set LIBOR on a daily basis.

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.