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LIBOR Transition: What you need to know

If you have a LIBOR-linked account, UK financial regulators want financial institutions, like ourselves, to transition customers to a suitable alternative reference rate, as LIBOR will not exist in its current form beyond 31 December 2021.

What is LIBOR?

LIBOR is the London Interbank Offered Rate. This has been used since the 1980s in financial markets as a benchmark for interest rates, including mortgages.

The Financial Conduct Authority (FCA) has instructed financial institutions to stop using LIBOR as a reference rate by the end of 2021, and has asked the market to find a suitable replacement. Along with the wider financial services industry, we will be transitioning to an alternative benchmark.

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 actions are we taking?

Alternative reference rates to LIBOR are still in development and we are proactively working with other banks, industry bodies, our regulators and trade associations to decide on the next steps.

We want to 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.

We will make sure we:

  • inform you in good time before the new interest rate is applied to your loan
  • explain your new rate
  • confirm how your new rate will operate over the remaining term of your loan

Why is LIBOR being phased out?

Globally, financial regulatory authorities have expressed 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.

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.

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?

We understand that you may have questions about how the LIBOR transition might affect you. We've tried to answer as many of these as we can below…

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.​

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.

At this stage, we 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.

LIBOR as a reference rate will no longer exist 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.

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.

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 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