Shawbrook Bank has confirmed that from July it will move its rates off the three-month LIBOR and on to the Shawbrook Base Rate.
Shawbrook says that will be “no financial detriment to your clients as a result of the immediate change…we are clearly unable to predict future fluctuations that may well have a financial impact.”
It adds that it aims to make the transition to the new base rate, “as seamless as possible”.
Shawbrook explains that its new rate will “typically” be the same as the Bank of England’s base rate, but that this is not guaranteed.
It offers two examples of scenarios that could cause a difference: first, where the official base rate does not reflect the cost of funds, and second, where the nature of the BoE’s rate is made.
“We do not directly link our products to [the BoE base rate], but intend to pass on changes that occur in [it] as long as it is representative of changes in banks’ market funding costs,” says Shawbrook.
Regarding pipeline cases, the bank says that the SBR will not apply to cases where a formal mortgage offer has been provided and is valid.
At the time of writing, the SBR stands at 0.10 per cent, the same as the official bank rate.
However, the SBR is subject to a minimum floor of 0.75 per cent, meaning borrowers actually pay 0.75 per cent.”
Matt Lenzie from Commercial Mortgages Broker said: “this is an interesting move, the risk associated with this switch is that in the long term borrowers may be impacted as the Shawbrook internal cost of funds may be higher than LIBOR.”