LIBOR is the London Interbank Offered Rate. LIBOR is the rate charged by one bank to another for lending money. The LIBOR is an international index that follows world economic conditions. LIBOR-indexed ARMs (Adjustable Rate Mortgages) offer borrowers aggressive initial rates and have proven to be competitive with popular ARM indexes like the Treasury bill.
Compared to other Indexes, LIBOR is one of the least stable. It changes more often and by greater amounts
With the LIBOR ARMs borrowers are generally protected from wide fluctuations in interest rates by periodic and lifetime interest rate caps.
