Adjustable Rate Mortgage-holders rejoice, LIBOR not being redefined … for now. Housing Wire covered earlier how changes to the LIBOR could radically impact home mortgage payments for folks with loans whose interest rates are tied to the index. You can all breathe a sigh of relief for the meantime, until the BBA gets around to overhauling the biggest sham of an index that side of the
From Bloomberg on the no news is good news for homeowners:
The British Bankers’ Association failed to change the way the
The BBA, an unregulated trade group, has been under pressure to overhaul the 24-year-old system after the Bank for International Settlements said in a March report some members understated their rates to avoid being perceived as having difficulty raising financing.
“The committee will be strengthening the oversight of BBA Libor,” the London-based organization said in an e-mailed statement today. “The details will be published in due course.” The composition of the bank panels that contribute rates were left unchanged, it said.
The BBA’s statement fell short of expectations for changes to Libor that ranged from altering the member banks from which rates are gathered to adding an extra rate survey each day to reflect trading in
“The BBA didn’t do anything; they don’t want to shake the boat,” said Stan Jonas, who trades interest-rate derivatives at Axiom Management Partners LLC in
Banks routinely misstated borrowing costs to the BBA to avoid the perception they faced difficulty raising funds as credit markets seized up, turning Libor into “a lie,” according to Tim Bond, head of asset allocation at Barclays Capital, a unit of Barclays Plc