Q&A: High Interest in This Rate, A Key to Credit

New York Newsday (10/02/08)
The London Interbank Offered Rate, or Libor, is the interest rate used by big international banks to make short-term loans to one another. It is calculated daily and plays a large role in the direction of adjustable mortgage rates and home equity lines of credit. Mortgage rates in the United States were pegged to Libor as the result of international cash entering the residential finance market. Libor typically is 0.5 percentage points higher than Treasury yields, but experts say larger spreads have dramatically hiked adjustable mortgage and commercial loan rates and could further restrict access to credit.