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July 24, 2008 11:31:02 PM CDT

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Surprise Rate Hike Will Soon Rattle US Borrowers

Posted Apr 19, 08 5:04 AM CDT in Business 

(Newser) – A surprise hike in a widely used interest rate is expected to soon send many US borrowers reeling, the Wall Street Journal warns. The London interbank offered rate, a yardstick for financial instruments including resettable mortgages, jumped sharply yesterday. The increase, a signal that banks are becoming more cautious about lending, could affect $9 trillion in debt.

The spike came as the British Bankers Association launched a review of the accuracy of information used to calculate the rate. The interbank level reflects the rate at which banks lend to each other—but there are concerns some banks have been understating their costs to paint a brighter picture of their financial situation. Analysts say if the rate is found to be inaccurate, the financial world could be shaken to its very foundations.

Source Wall Street Journal

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The London interbank rate spiked sharply after the British Banker's Association announced its plans to review its accuracy.   (Getty Images)
The British Bankers Association has begun a review of the London interbank rate's accuracy amid concerns that some banks have been understating their borrowing costs.   ((c) L-plate big cheese)
The London interbank interest rate, the world's most commonly used interest rate, rose sharply yesterday for the second day in a row.   ((c) pantxorama)
The London interbank rate yesterday had its biggest rise since the beginnings of the credit crunch last summer.   ((c) tompagenet)
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interest rate  • banking  • debt  • mortgage rates  • British Bankers Association


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