Your LIBOR rate has changed to Term SONIA

Term SONIA is based on the SONIA overnight reference rate. SONIA stands for Sterling Overnight Indexed Average and is the average rate at which banks will lend to one another overnight. SONIA is administered and published by the Bank of England and selected as the preferred alternative to LIBOR by an industry-wide working group.

Term SONIA replicates the relevant forward-looking periods that exist for LIBOR, for example three-month LIBOR. Like LIBOR, Term SONIA is set at the start of your interest period, meaning you have certainty of payment. For example, three-month Term SONIA will be fixed for the three-month interest period after which it is set. We believe Term SONIA is the most reliable long-term solution for you because:

• It is based on SONIA, which is rooted in real-life transactions and well established, having been used since 1997​
• The rate is independently calculated

UK financial regulators announced the end of LIBOR in its current form after 31 December 2021 and lenders were required to move LIBOR-linked mortgage customers where possible to a suitable alternative reference rate.

No, this wasn’t our decision and we, along with the rest of the market, have followed guidance from global regulators.

No. LIBOR as a reference rate does not exist in its current form after the end of 2021, so it has been necessary to move to a replacement.

An alternative rate called ‘Synthetic LIBOR’ was created as a temporary solution for certain accounts that could not be transitioned by the end of 2021. However, this was not applicable for Paragon Mortgages. The way Synthetic LIBOR is currently calculated means that it will always be higher than Term Sonia.

As your mortgage is variable, your monthly payments will vary dependent on changes to the reference rate. They will continue to reset as before.

Yes, you can log in to the Paragon Customer Portal and view all your Term SONIA-linked accounts.

Yes, where possible all lenders have had to move customers from LIBOR to an alternative reference rate. However, not all lenders may have selected the same replacement rate as contract terms may vary.

The terms and conditions that apply to your mortgage contain a clause that, in the event that we cannot determine LIBOR as set out in your terms, allows us to set LIBOR at whatever reference rate we may reasonably consider appropriate in light of the market circumstances then prevailing.

The terms and conditions that apply to your mortgage may also contain a clause which allows us to vary the reference rate of your mortgage in certain circumstances, such as to allow us to administer the mortgage more efficiently, to reflect market conditions or to take account of a decision by a regulator. As such, we wrote to you last year to notify you of a variation to the terms of your contract.

There have been no fees for moving your account to the new Term SONIA rate.

Term SONIA is an independently calculated rate and based on the SONIA reference rate, which is rooted in actual transactions between banks.

SONIA is administered and published by the Bank of England and selected as the preferred alternative to LIBOR by an industry-wide working group

There may be fees to pay if you switch to an alternative product with Paragon, or with another lender.

The financial markets calculate Term SONIA rates based on expectations for interest rates over the coming months. Currently, the Bank of England is expected to raise rates over the coming months, so Term SONIA is higher than Bank Base Rate. Conversely, when the Bank of England is expected to lower rates, Term SONIA would be lower than Bank Base Rate.