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Transitioning from LIBOR

The use of the London Interbank Offered Rate (LIBOR) is expected to be discontinued by the end of 2021, which means that we, along with the wider financial services industry, will be making alternative arrangements for customers with a LIBOR product.

The market for alternative reference rates to LIBOR is still developing and we‘re proactively working with other banks, industry bodies, our regulators and trade associations to decide on the next steps and make sure the transition to an alternative rate is a smooth one for all our customers. We will keep you updated on developments as the LIBOR transition progresses throughout this period.

What is LIBOR?

LIBOR is one of a number of Interbank Offered Rates (IBORs). These rates have been widely used in financial markets as a reference rate in financial agreements, including mortgages, since the 1980s.

Why is LIBOR being phased out?

Globally, financial regulatory authorities have 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.

Since the 1980s LIBOR has been used widely as an interest rate benchmark for many products, including mortgages. However, its use has declined since the global financial crisis in 2008/09 and the lack of an active market has made the rate unstable and unreflective of true borrowing rates. Therefore, financial regulators globally have told banks and financial institutions to find a suitable replacement.

When will LIBOR be phased out?

It is likely that LIBOR will be discontinued in all its forms by the end of 2021, and users of LIBOR are preparing for this.

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 complying with guidance from global regulators.

What does the LIBOR transition mean for you?

I am a buy-to-let mortgage customer
How does this impact my buy-to-let mortgage product(s) with Paragon?

We will continue to update you on developments, including how these changes are likely to impact the LIBOR-based products you already have with us. At this stage, there is no market consensus alternative reference rate and we, along with other mortgage lenders, are working towards this. We will write to you giving you notice ahead of any changes and the new reference rate the market decides to adopt.

How can I find out what LIBOR-linked buy-to-let mortgage products I have with Paragon?

To view your LIBOR-based accounts with us, please log in to the Paragon Customer Portal at: www.paragonbank.co.uk/personal/mortgages/myaccount

Alternatively, contact us on 0345 849 4077

Does this affect me from a legal, tax or financial position?

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’re working hard to ensure that this does not result in significant disruption for our customers.

We will provide you with more detail about how any changes may affect your products as soon as we are able to.

Will my rate or monthly payment increase?

At this stage, we, along with the wider mortgage market, do not know what replacement rate will be used. However, we will give you notice before the new rate is applied to your loan and provide you with as much information as we can.

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

LIBOR as a reference rate will no longer be a reliable rate after the end of 2021, so it will be necessary to move to a replacement. This is a decision that has been made by global financial regulators and therefore we can no longer use LIBOR. We are currently exploring all reasonable alternatives.

What rate do you expect to revert to?

We, along with the wider market, are still assessing the potential alternatives to the LIBOR reference rate. We will update you as the situation develops.

When will you have further information?

We are currently taking part in a number of UK financial services industry panels which are looking at the alternatives to LIBOR and we are exploring all reasonable alternatives. The decision regarding the replacement will be based on a variety of factors, including taking into account the interests of our customers and the expectations of our regulators (the PRA and the FCA).

I am a customer with a mortgage on my home
How does this impact my mortgage product(s) with Paragon?

We will continue to update you on developments, including how these changes are likely to impact the LIBOR-based products you already have with us. At this stage, there is no market consensus alternative reference rate and we, along with other mortgage lenders, are working towards this.

We will write to you giving you notice ahead of any changes and the new reference rate the market decides to adopt.

How can I find out what LIBOR-linked buy-to-let mortgage products I have with Paragon?

To view your LIBOR-based accounts with us, please log in to the Paragon Customer Portal at: www.paragonbank.co.uk/personal/mortgages/myaccount

Alternatively, contact us on 0345 849 4077.

Does this affect me from a legal, tax or financial position?

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’re working hard to ensure that this does not result in significant disruption for our customers. We will provide you with more detail about how any changes may affect your products as soon as we are able to.

Will my rate or monthly payment increase?

At this stage, we, along with the wider mortgage market, do not know what replacement rate will be used. However, we will give you notice before the new rate is applied to your loan and provide you with as much information as we can.

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

LIBOR as a reference rate will no longer be a reliable rate after the end of 2021, so it will be necessary to move to a replacement. This is a decision that has been made by global financial regulators and therefore we can no longer use LIBOR. We are currently exploring all reasonable alternatives.

What rate do you expect to revert to?

We, along with the wider market, are still assessing the potential alternatives to the LIBOR reference rate. We will update you as the situation develops.

When will you have further information?

We are currently taking part in a number of UK financial services industry panels which are looking at the alternatives to LIBOR and we are exploring all reasonable alternatives.

The decision regarding the replacement will be based on a variety of factors, including taking into account the interests of our customers and the expectations of our regulators (the PRA and the FCA).

I am a business customer
How does this impact my product(s) with Paragon?

We will continue to update you on developments, including how these changes are likely to impact the LIBOR-based products you already have with us, or may be considering taking out, and the likely timeframe for the transition.

We would recommend you seek independent advice on how the transition may affect you in respect of your circumstances.

How can I find out what LIBOR-linked buy-to-let mortgage products I have with Paragon?

To view your LIBOR-based accounts with us, please log in to the Paragon Customer Portal at: www.paragonbank.co.uk/personal/mortgages/myaccount

Alternatively, contact us on 0345 849 4077

Does this affect me from a legal, tax or financial position?

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’re working hard to ensure that this does not result in significant disruption for our customers.

We will provide you with more detail about how any changes may affect your products as soon as we are able to.

Will my rate or monthly payment increase?

At this stage, we, along with the wider mortgage market, do not know what replacement rate will be used. However, we will give you notice before the new rate is applied to your loan and provide you with as much information as we can.

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

LIBOR as a reference rate will no longer be a reliable rate after the end of 2021, so it will be necessary to move to a replacement. This is a decision that has been made by global financial regulators and therefore we can no longer use LIBOR. We are currently exploring all reasonable alternatives.

What rate do you expect to revert to?

We, along with the wider market, are still assessing the potential alternatives to the LIBOR reference rate.

We will update you as the situation develops.

When will you have further information?

We are currently taking part in a number of UK financial services industry panels which are looking at the alternatives to LIBOR and we are exploring all reasonable alternatives.

The decision regarding the replacement will be based on a variety of factors, including taking into account the interests of our customers and the expectations of our regulators (the PRA and the FCA).

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 a guide about LIBOR-linked facilities, including loans.

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.

Bank of England

The Bank of England (BOE) produced a guide, as part of a working group, to outline and explain the LIBOR transition, what it means and what you should do to prepare for it.

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