The only mortgages which track Libor and are therefore directly affected by its pricing are those available via the private banks, commercial loans and mortgages from one or two specialist lenders, such as Paragon. Most mortgages track the lender's standard variable rate (SVR) or the base rate, so many are not directly affected by Libor pricing.
However, indirectly it does affect borrowers. When banks increase their spreads, they cite the reason as Libor; the cost of their own borrowing is more expensive so they have to pass this cost onto customers.
So what can borrowers do? It is vital that borrowers who require a variable rate choose a mortgage which maps a centrally controlled index such as base rate. This cannot be manipulated by individual lenders. A mortgage that tracks the lender's SVR can also cause problems as we have seen in recent months with several lenders raising their rates even though there has been no movement in base rate.
When it comes to choosing a mortgage, try and select one that is fully transparent and tracks the Bank of England base rate. This ensures you know exactly where you stand.
For further advice, contact SPF Private Clients.