LIBOR Rate Index Transition

Effective September 14, 2020, BECU will no longer use the London Inter-Bank Offered Rate (LIBOR) index to determine interest rates for Adjustable-Rate Mortgages, as it is being discontinued after 2021.

Frequently Asked Questions

What is the LIBOR rate index?
LIBOR has been the globally accepted key benchmark interest rate. LIBOR is based on estimated borrowing rates banks use to borrow from each other.

Why is the LIBOR going away?
The LIBOR is not considered a useful and reliable benchmark because it is based on transactions between banks that occur less frequently than in years past. There is also no guarantee the LIBOR will be available after the end of 2021, according to the UK regulator that oversees the LIBOR panel. Financial institutions and governments around the world have been working to identify alternative indices to replace the LIBOR.

What will BECU use as the replacement index? 
The index used will depend on the type of ARM product selected. We will use the Secured Overnight Financing Rate (SOFR) or the Constant Maturity Treasury (CMT) as the benchmark rate index. 

How will the index change impact payments and why?
The adjustable interest rate will be calculated like the LIBOR during the adjustment period, however the key difference will be the current index. The LIBOR index comes from the one-year LIBOR published by the Wall Street Journal and adjusts every 12 months. The SOFR index is a calculated 30-day average index that will adjust every six months. 

What if I have a locked LIBOR rate loan currently in process?
No action is required on your part if your rate is currently locked under the LIBOR rate. The loan will close as a LIBOR loan. Keep in mind, however, when the LIBOR index is retired, your mortgage will transition to a new index. Contact your Loan Officer for more information

What will happen if I have an existing LIBOR ARM mortgage?
Existing ARM loans will remain on the LIBOR product until the LIBOR index is discontinued. At that time, all closed LIBOR ARM loans will transition to the new index.

What options do I have if I do not want my LIBOR ARM to transition to the new replacement index?
You can choose to refinance to a new loan product, or pay off your LIBOR ARM.

If you have additional questions, please contact your Loan Officer or the mortgage department at 800-233-2328.