Changes to interest rate benchmark could create 'stability' in mortgage market

Posted: 12 Jun 2008 13:01:59 GMT

Changing the process that sets the interest rate at which banks borrow money from each other could stabilise the mortgage market, an industry expert has advised.

Changing the process that sets the interest rate at which banks borrow money from each other could stabilise the mortgage market, an industry expert has advised.

Independent financial advisor, Moneyfacts, has suggested that the decision to add more contributors to the London Interbank Offered Rate (LIBOR) will be beneficial to borrowers.

The British Banker's Association (BBA) announced changes to the LIBOR rate which Moneyfacts hope will "give more confidence" in the index and mean large increases in rates are not left unchecked.

Darren Cook, spokesperson for Moneyfacts.co.uk, said: "These measures could instil some stability within the mortgage market and hopefully increase the shelf life of mortgage products from its current 11 days to 30 days, where we were this time last year."

LIBOR is compiled by the BBA in conjunction with Reuters and is released to the market daily. The rates are the most widely used benchmark for setting short-term interest rates.

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