Watch our video explaining why Shawbrook is transitioning some customers away from LIBOR to SBR and the impact that it may have.
This section explains our transition away from LIBOR onto SBR. This only applies to some of our customers however, so please check below to see if this applies to you.
All new loans originated since 1st July 2020 have used SBR as their reference rate.
With regards to existing customers, at this present time, we are only transitioning our buy-to-let and commercial investment mortgage customers, whose loan was advanced from Shawbrook Bank, from 3-month LIBOR to SBR, which will take into account the Bank of England Bank Rate.
This transition does not apply to our Business Finance customers, or those customers whose loan was advanced from another lender. These loans will be transitioned in the future and affected customers will be communicated with in due course.
From 1st January 2021 we’ll be moving our buy-to-let and commercial investment mortgage customers, whose LIBOR-linked loans were advanced by Shawbrook Bank, onto SBR.
If the interest rate on your Loan is currently variable, you will not see an immediate change to your monthly payment amount. This is because a minimum LIBOR floor of 0.75% applies under the terms of your Loan and that floor will continue to apply when we move your Loan to SBR. Your monthly payment will therefore only change if SBR exceeds 0.75%.
If the interest rate on your Loan is currently fixed, your payments will remain unchanged until the fixed rate period expires, and you move onto the variable rate. At this point the interest rate on your Loan will be calculated using SBR, rather than LIBOR. During this period, your monthly payments will only change when SBR changes, subject to the LIBOR floor (which will also apply to SBR) you have agreed in your Loan
The UK financial services regulators, the Financial Conduct Authority and the Prudential Regulation Authority (Bank of England), require UK financial institutions to transition away from LIBOR no later than end of 2021.
BBR is a policy tool used by the Bank of England to influence the economy and is more or less representative of what it costs banks to lend. Sometimes however, there is a disconnect between BBR and Shawbrook’s cost of funds, therefore we have developed SBR to accommodate this. We do intend however to pass on any changes that occur in BBR, as long as it is representative of changes in the bank’s market funding costs.
As a result of changing the terms of your Loan to calculate the interest using SBR we have had to make certain related changes. These are set out in the Notice of Change you will receive from us.
Yes – you have the right under the terms of your Loan to stay on 3-month LIBOR. However, you should be aware that:
If you have received a letter from us to say that you are transitioning from LIBOR to SBR, and you accept the changes, you do not need to do anything. We will treat your continued monthly payments under your Loan as your acceptance of these changes. If you do not accept the changes, you must tell us before 18th December 2020 by calling us on 0345 848 0227. If you choose not to accept the changes the interest rate on your Loan will continue to be calculated using LIBOR (unless a fixed rate period is continuing) until LIBOR ceases to be available. At this point, we will transfer you to SBR under the existing terms of your Loan.
Note that it is possible that LIBOR may become more volatile prior to its actual discontinuation. We are not able to predict whether any such volatility will result in an increase to the amount of interest that you will pay under your Loan.
There are multiple external sources of information which you may find useful, including the following:
You should also consider whether you wish to seek further guidance and independent advice from your professional advisors on the potential implications of this change including in relation to your financial, legal, accountancy or tax matters.
If you have any questions regarding any potential implications to your financial, legal, accountancy or tax matters, you should seek further guidance and independent advice from your professional advisors.