LIBOR
(London Interbank Offered Rate) – Information About Upcoming Changes1
You may have heard about changes to LIBOR. LIBOR was an index used to determine the interest rate on some adjustable rate loans. LIBOR ceased being used on June 30, 2023. This affected all loans and financial products that used LIBOR to determine interest rate.
What this Means for You
Adjustable Rate Mortgage loans (ARMs) feature a fixed interest rate for a set period. Then the interest rate periodically adjusts based on an index (third party published benchmark) and a margin (agreed upon amount added to the index to determine the interest rate). The index and margin for your ARM were specified in the documents you signed at loan closing. If your ARM was based on LIBOR a new published index has been or will be assigned to your loan at your first rate adjustment after June 30, 2023. No action is needed on your part.
LIBOR FAQs
For more than 40 years LIBOR was a global key benchmark for setting the interest rates charged on adjustable rate loans. Regulators determined that LIBOR had become unreliable. The Althernative Reference Rates Committee (ARRC) was formed in 2014 to address LIBOR’s end.
ARRC was a group of private market participants convened by the Federal Reserve Board and the New York Fed to help ensure a successful transition from U.S. dollar (USD) LIBOR, to a more robust reference rate, its recommended alternative, the Secured Overnight Financing Rate (SOFR). The AARC concluded its work and ceased operations in November 2023. You can learn more about ARRC from their website: https://www.newyorkfed.org/arrc.
In 2023, First County Bank selected Secured Overnight Financing Rate, or SOFR, as the reference rate to replace LIBOR for all new and existing adjustable rate mortgages. The SOFR is based on overnight transactions in the U.S. dollar Treasury repo market, the largest rates market at a given maturity in the world and had been selected by the ARRC as its recommended replacement for LIBOR.
SOFR has or will be used to determine your interest rate when your loan had or has its regular interest rate adjustment after June 30, 2023. Your interest rate will continue to be based on the LIBOR index until the next interest rate adjustment, if your loan has not had an interest rate adjustment since June 30, 2023.
All other terms and details of your loan will remain the same.
Your original loan documents (specifically the mortgage note), allow for the index of an adjustable rate mortgage to change if the index is no longer available.
The change in index alone won’t necessarily increase your monthly payment. With any ARM loan, the interest rate (and therefore the payment) can increase or decrease whenever you have a scheduled interest rate adjustment regardless of the index.
If you’re experiencing financial hardship, contact us for assistance. If you’re concerned about your ability to make your payment and are interested in a new mortgage loan, learn about mortgage options:
It may be a good time to determine if your mortgage still meets your financial needs. If your financial goals have changed or you’re looking for a stable payment amount consider refinancing.
To learn more visit the Consumer Financial Protection Bureau’s (CFPB) website at LIBOR and adjustable-rate loans. | Consumer Financial Protection Bureau (consumerfinance.gov)
We want to help you understand the terms of your ARM and any changes related to the index replacement. If you have concerns about your ARM and the index change we are happy to provide you with further information. If you have any questions please contact our CustomerFirst Contact Center at (203) 462-4400, Monday-Friday, 8:30 a.m.-4:30 p.m., excluding bank holidays or stop by any of our conveniently located branch offices.
1 This is provided for general information purposes only. In our written and oral communications with you, we are not giving you any economic, tax, accounting, legal, or regulatory advice or recommendations, and are not acting in a fiduciary capacity. First County Bank shall in no event be liable to you or any third party for any direct or indirect, special, incidental or consequential damages, losses, costs or liabilities arising from or in connection with this information. We reserve the right to amend, supplement, replace, or remove this information at any time and without notice to you.
