LIBOR Transition: What you need to know

The Financial Conduct Authority (FCA) announced the end of LIBOR in its current form after 31 December 2021 and financial institutions such as Paragon have been required to move customers with LIBOR-linked accounts to a suitable alternative reference rate, where possible.

This change has now taken place and we have moved customers of our different lending businesses with LIBOR-linked accounts to new reference rates.

Buy-to-let or Residential mortgage customer?

If you are an existing Paragon Buy-to-let or Residential mortgage customer, you can find more information about how this change affects you by visiting our dedicated information page.

More information

What is LIBOR?

LIBOR is the London Interbank Offered Rate. This was used since the 1980s in financial markets as a benchmark for interest rates, including mortgages. LIBOR aimed to measure the interest rate at which banks borrow from one another.

Why has LIBOR been phased out?

Globally, financial regulatory authorities had expressed concern that the interbank lending market, which IBORs are intended to reflect, may not represent a sufficiently reliable basis for the setting of interest rates in financial contracts going forward.

The use of LIBOR had declined since the global financial crisis in 2008/09 and the lack of an active market made the rate unstable and unreflective of true borrowing rates. Therefore, financial regulators globally told banks and financial institutions to find a suitable replacement for customers.

Was the phasing out of LIBOR a Paragon decision?

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

What does the LIBOR transition mean for you?

Your Paragon LIBOR-linked account will have now transitioned to an alternative reference rate. We have written to and communicated with all of our LIBOR-linked customers throughout 2021 to make them aware of the change and how it impacts them.

Your LIBOR-linked product(s) with Paragon will have transitioned to an alternative reference rate. We will have written to you during the past year to advise of the reference rate your account has switched to.

Whilst the Financial Conduct Authority and the financial industry recognise that this is a very significant change for financial markets and customers with LIBOR linked products, we have worked hard to ensure that this does not result in significant disruption for our customers.

The intention of LIBOR transition is that customers will not be negatively impacted by a change. We have selected reference rates which we believe are suitable for our different customers’ requirements.

However, as the reference rates selected are variable, payments can go up or down as they did previously. ​

LIBOR in its previous form no longer exists, so it has been necessary to move to an alternative reference rate.​

We have transitioned customers to a range of different reference rates based on the specific customer groups’ requirements. We have communicated with customers to ensure they are aware of what reference rate they have been transitioned to.

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