Скачать или смотреть SS51: Understanding the London Interbank Offered Rate LIBOR

Charles discusses what steps landlords can take to keep excellent tenants in their property.

Talking Points:
➞ Libor rates are calculated for five currencies (US dollar, EURO, British pound, Japanese yen and Swiss franc) and borrowing periods (maturities) ranging from overnight to one year and are published each business day by Thompson Reuters. Many financial institutions set their own rates relative to it.
➞ At least $350 trillion in derivatives and other financial products are tied to Libor; credit cards, syndicated loans, student loans, individual variable mortgages and the list goes on.
➞ If you have a credit card, you probably already have a financial product that is tied to Libor; check your statement and you will see how they calculate your interest rate and usually it will be LIBOR (1 month or 3-month) + margin OR prime rate + margin
➞ The most popular Libor is the 3-month US dollar rate
➞ What does that have to do with real estate? Typically, all variable real estate debt is based off of LIBOR; while fixed debt is based off of the 10-year treasury
➞ In 2008, 60% of prime adjustable-rate mortgages and all subprime mortgages were indexed to Libor
➞ The Libor was created a Greek banker in 1969 when he was arranging a $80 million syndicated loan for the Shah of Iran
➞ LIBOR came into widespread use in the 1970s and 1980s and it is the average interest at which major banks around the world borrow from each other.
➞ Libor is calculated daily when the British Bankers Association (BBA) asks major banks around the world how much they would charge other depository institutions for a short-term loan. The BBA takes out the lowest rate and the highest rate and then averages the remaining figures and publishes this rate.
➞ In 2012, the LIBOR scandal was discovered which included several bankers at major institutions who were rigging the rate and it has been discovered that this started as far back as 2003.
➞ In 2023, LIBOR is being phased out; according to the Federal Reserve and regulators in the UK and will be replaced with the Secured Overnight Financing Rate (SOFR) but at this time; if you are borrowing variable adjustable debt; you will most likely have a rate that is tied to LIBOR.
➞ SOFR is based on prior activity of overnight US transactions while LIBOR is prospective

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