David Copland, managing director at Pink Home Loans commented: “In the past LIBOR linked mortgages have been unpopular mainly due to the fact that borrowers did not understand them.”
However Copland believes that due to the credit crunch the general public now have a better understanding of LIBOR. He goes on to suggest that charging LIBOR is the fairest method for both parties. “Standard variable rates have always favoured the lenders as it is their decision when and how they set it against Bank Base Rate (BBR). BBR products on the other hand have given the borrower the upper hand, especially in the current market, in which there has been such disengagement between BBR and LIBOR. Linking products to 3 month LIBOR seems to be the way forward - the only issue appears to be realignment every 3 months, however this can be overcome by having either an annual change of payments or linking to a flexible mortgage.”
