Who does it affect?
It has been said that Barclays Libor has not been that honest to clients. Everyone who has a mortgage or “sub-prime” loans is directly affected. A certain Ray Boulger, who is a mortgage broker of John Charcol, suggests that there are over 200,000 mortgages that have high interest rates – higher than the normal rates. Furthermore, individuals who’d opted for sub-prime loans before this financial fiasco paid high interests that were set by Libor.
More often than not, the interests on these kinds of mortgages are determined using a three-month formula created by Libor that sets +1.5%. After three months, the lenders will again change the interest rates. Libor would be the one to price the first months but somewhere in the stipulations, it would let Libor have the final say at the end of a certain term.
Do they overcharge every mortgage?
The answer as to the question if every mortgage is overpriced is not conclusive. This means that you may be overcharged but then again you may not be. At one point, almost all traders of Barclays did everything to raise the interest ceilings to generate more profit. On the other hand, when the financial calamity struck, Libor was forced to lower the rates. Having said this, it would be but logical to say that not everyone had to live with paying high interest rates.
When Libor is falling apart, will it affect people with small saving accounts?
Majority of the savings rates determined by societies dedicated for building and banks do not have much connection with Libor. Thus, those people who have small saving accounts are not affected. However, those institutions that save huge amounts of money in short periods are likely to pay interest rates that are somehow connected with Libor. Such deposits would have had lower interest rates as opposed to what they have earned.
Will money losers demand the money they paid?
Those people who lost fair amounts of money are likely to demand their money back. At this point, class suits are prepared against those banks that influenced Libor. This would come not as a surprise because the money losers here are huge, wealthy institutions and not those people who need to exert a lot of effort to make money and survive. Thus, these companies could fund legal actions with ease. Such cases will surely take years to give everyone their due though.
Where does that money from the £290m in fines go?
Sources say that the fines that were paid will go directly to the Financial Services Authority or FSA. A lot of people thought that the FSA is financed from taxes. They are wrong because banks and financial institutions’ levy is the one that finances the FSA. Additionally, they would pay for lower rates because of the existence of these fines.