LIBOR
The London Interbank Offered Rate — a historically key benchmark for global short-term lending, replaced by SOFR in 2023.
What is LIBOR?
LIBOR (London Interbank Offered Rate) was the world's most widely referenced benchmark interest rate, representing the average rate at which major global banks said they could borrow from one another in the London interbank market. It underpinned an estimated $300+ trillion in financial contracts including mortgages, student loans, derivatives, and corporate loans. Following a 2012 manipulation scandal and declining market liquidity, regulators phased out LIBOR. US Dollar LIBOR officially ceased publication after June 30, 2023, replaced primarily by SOFR (Secured Overnight Financing Rate), which is based on actual transactions rather than bank submissions.
Example
A pre-2023 adjustable-rate mortgage tied to 6-month USD LIBOR reset semiannually. When LIBOR rose from 0.5% to 5.0% in 2022, the borrower's rate and payment reset significantly higher — illustrating LIBOR's direct impact on consumer costs.