Like everyone else, Verizon executive Bryan Matthews read the headlines about the rate-rigging scandal involving Libor, short for the London Interbank Offered Rate. Libor is used to set the rate for some 200,000 adjustable-rate mortgages in the U.S. each year and tens of billions of dollars in private student loans. It also affects the interest paid on money market mutual funds and the prices on complex derivative securities. Barclays Bank paid a $450-million fine, and Barclays and other banks face multiple lawsuits for allegedly submitting false interest rates to manipulate rate-setting.
SEE ALSO: Lower the Rate on All Your Loans
Nevertheless, Matthews opted for an ARM linked to Libor when he refinanced his York County, S.C., home last summer, because the 2.85% loan offered an attractive monthly payment. Borrowers like Matthews needn’t worry about the accuracy of their loan rates as they adjust, especially if, as some experts have suggested, regulators change Libor to an index based on actual bank transactions.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
And the alleged rate-fixing was likely to have been a slight positive for existing Libor borrowers. Banks may have underestimated their borrowing costs, which meant that mortgage and student-loan borrowers received a slightly lower rate than they would have otherwise. But don’t worry, says Mike Fratantoni, of the Mortgage Bankers Association: There’s “no talk of going back and changing people’s payments.”
This article first appeared in Kiplinger's Personal Finance magazine. For more help with your personal finances and investments, please subscribe to the magazine. It might be the best investment you ever make.
-
Could This Little Known Data Shift Hurt Your 2026 Social Security COLA?The BLS has changed how it measures the inflationary data that determines whether Social Security benefits will get a Cost-of-Living Adjustment (COLA). Will it hurt your benefits?
-
Financial Pros Provide a Beginner's Guide to Building Wealth in 10 YearsBuilding wealth over 10 years requires understanding your current financial situation, budgeting effectively, eliminating high-interest debt and increasing both your income and financial literacy.
-
Amazon Resale: Where Amazon Prime Returns Become Your Online BargainsFeature Amazon Resale products may have some imperfections, but that often leads to wildly discounted prices.
-
Roth IRA Contribution Limits for 2025Roth IRAs Roth IRA contribution limits have gone up. Here's what you need to know.
-
Four Tips for Renting Out Your Home on Airbnbreal estate Here's what you should know before listing your home on Airbnb.
-
Five Ways to a Cheap Last-Minute VacationTravel It is possible to pull off a cheap last-minute vacation. Here are some tips to make it happen.
-
How Much Life Insurance Do You Need?insurance When assessing how much life insurance you need, take a systematic approach instead of relying on rules of thumb.
-
When Is Amazon Prime Day? Everything We Know, Plus the Best Deals on Apple, Samsung and MoreAmazon Prime Amazon Prime Day is four days this year. Here are the key details you need to know, plus some of our favorite deals to shop during the sale.
-
How to Shop for Life Insurance in 3 Easy Stepsinsurance Shopping for life insurance? You may be able to estimate how much you need online, but that's just the start of your search.
-
Five Ways to Shop for a Low Mortgage RateBecoming a Homeowner Mortgage rates are high this year, but you can still find an affordable loan with these tips.
