What does LIBOR stand for?

LIBOR stands for London Inter-Bank Offered Rate. It is a benchmark interest rate that major global banks charge each other for short-term loans. LIBOR serves as a reference point for setting interest rates on various financial products, including mortgages, bonds, and derivatives. This rate is calculated from the average interest rates at which a selection of banks would lend to one another in the interbank market, and it reflects the general cost of borrowing in the global money market.

The significance of LIBOR in financial markets cannot be understated, as it plays a critical role in determining borrowing costs and the overall economic landscape. As financial products and transactions are often pegged to LIBOR, understanding its function is essential for mortgage loan originators and professionals in the finance industry.