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A growing pain brings us this week’s Marketplace Money buzzword: LIBOR.
“LIBOR” stands for London Interbank Offered Rate. It’s the rate which international banks charge each other for loans. It’s also used for calculating adjustable-rate mortgages.
And that’s where the pain comes in. Why? Because of the credit and subprime crises, the LIBOR is rising — fast. This week, it swelled to the highest level in six years. That means if you’ve got a $400,000 adjustable-rate mortgage, you could end up paying $47,000 more over the life of the loan.
Ouch, that hurts.
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