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LIBOR replacement

Understanding your new Term SONIA rate​

Mortgages that are linked to LIBOR, will move to a new reference rate by the end of 2021.

We’re here to support you through this change. Watch our short video below or read our FAQs for further information.​

Supporting customers with LIBOR changes

Hear directly from Richard Rowntree, Managing Director of Mortgages,​ about the LIBOR replacement rate, Term SONIA.​

About your new rate

We have chosen Term SONIA as your new reference rate. This means any LIBOR-linked mortgages you hold with us will be transferred to this new rate.

Term SONIA is based on the SONIA overnight reference rate, which is administered and published by the Bank of England and selected as the preferred alternative to LIBOR by an industry-wide working group. It is independently calculated and rooted in real-life transactions between financial institutions.

Read more about Term SONIA and why we have chosen it

Why your rate needs to change

UK financial regulators have instructed lenders to move LIBOR-linked mortgage customers to an alternative reference rate where possible, as LIBOR is no longer seen as a sufficiently robust or sustainable rate.

Our Rate Promise

To support a smooth transition, we have introduced a Rate Promise to ensure that you will pay no more than you would have if your account had remained on LIBOR for the remainder of this year.

From your transition date until the end of 2021, when LIBOR ceases to be an available reference rate, your monthly repayment will be based on the lower of your existing rate linked to LIBOR or the transition rate linked to Term SONIA.

We will automatically apply the Rate Promise to your account ahead of your payment date.

What this means to you

To help you see what impact this may have on your accounts, you can log in to the Paragon Customer Portal to view an indication of Term SONIA and compare your current payments.

The rate you will pay after the transition from LIBOR will be based on:

  • Term SONIA
  • The product margin set when you took out your mortgage with us

In the meantime, we will continue to update this page and will contact you with any other information to help you through this period.

Transition timeline

26 March 2021

From this date, you will receive a letter and leaflet about Term SONIA

1 June 2021

From this date, we will confirm your new rate by letter. This will be your transition date​

31 December 2021

LIBOR ends in current form. Your mortgage will be calculated using Term SONIA

From the date we apply Term SONIA to your account (your transition date) our Rate Promise will make sure
you will only pay the lower of LIBOR or Term SONIA, up to 31 December 2021

You do not need to take any action

We will automatically apply the new rates to LIBOR-linked accounts.​

Supporting FAQs

What is Term SONIA and why have we chosen it?

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
Why is LIBOR being phased out?

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

Is the phasing out of LIBOR a Paragon decision?

No, this isn’t our decision and we, along with the rest of the market, are following guidance from global regulators.

Can I choose to stay on my LIBOR-linked product?

No. LIBOR as a reference rate will no longer exist in its current form after the end of 2021, so it will be necessary to move to a replacement.

What will my new monthly payments be and when will they change?

As your mortgage is variable, your monthly payments will vary dependent on changes to the reference rate. However, under Paragon’s Rate Promise, your repayments will be based on the lower of either your existing rate linked to LIBOR or the transition rate linked to Term SONIA until the end of 2021.

Can you give me an indication of the likely payment amount now?

Yes, you can log in to the Paragon Customer Portal and view all your LIBOR-linked accounts and the potential changes to your payments. We have based this on the latest reset Term SONIA rate, so this is an indication and it may change again before we have moved your account over.

Is Paragon acting in line with other lenders/following guidance from the regulator?

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

How is Paragon allowed to change the terms of my mortgage mid-contract?​

Your terms and conditions allow us to choose a new reference rate where we can no longer use the old rate.​

Will there be any fees for this transaction?

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

How is Paragon ensuring Term SONIA is not open to manipulation and is fair to customers?

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.

Will there be any fees for changing to a new product?

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

Where can I find more information about what’s happening in the industry?

UK Finance

UK Finance is the collective voice for the banking and finance industry and represents more than 250 firms across the sector.

They have produced some FAQs to support customers through the LIBOR transition.

Financial Conduct Authority

The Financial Conduct Authority (FCA) is the conduct regulator for nearly 60,000 financial services firms and financial markets in the UK.​

The FCA have produced some information for borrowers, supporting them through the LIBOR transition.​​

Bank of England

The Bank of England (BOE) have issued an announcement about the end of LIBOR.

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551