Interest Rates are calculated by reference to a margin (spread) over the cost of funds. The cost of funds for variable rate loans is either the Bank’s Base Rate or 3 Month LIBOR (London Inter-Bank Offer Rate) – the wholesale rate paid by banks to other banks.

To achieve a fixed interest rate with a bank, it is necessary to enter into a Swap or Fixed Rate Agreement (FRA). This is organised by the bank in the wholesale market where one party is seeking to protect against rising interest rates and the other against falling interest rates. The swap rates indicated in the Interest Rate Report are for interest-only loans for the corresponding period.

Alternatively the cost of funds is related to the Redemption Yield achieved from investing in Government Securities (Gilts). This practice usually applies to loans granted by Insurance Companies. The interest rate indicated is for an interest-only loan for the same period as the Gilt.

Interest rate report:
 For our up to date Interest Rate Report including Swaps and Gilts, click here.