What the hell is LIBOR and why should I care?

If you have a mortgage, you should at least know what LIBOR means, even if you don’t end up caring about it.

Disclaimer: This is a brief explanation of what it is, it’s way more complex than how I’m portraying it, and I don’t claim to be a professional financial advisor by the way…I’m just a 24-year old woman trying to learn more about her money

So.

LIBOR stands for London Interbank Offered Rate, and it sounds like “Lie-Bore” (think of a really boring, skeezy, sleazy blind date as a metaphor to remember how to pronounce it).

And LIBOR means just that: it’s a short term interest rate of how much international banks charge one another for lending and borrowing money. When I say “short term interest rate“, I mean that the rate can change anywhere from overnight to 12 months. So in other words, the LIBOR tracks how much it costs for about 20% of the most established, trustworthy banks in the world to borrow money from other banks. Big banks. Not little ones around the corner in the ‘hood. Big names.

In light of what’s happening to the financial markets in North America, people should care about LIBOR because it is used as the benchmark rate by which you set the ARM (Adjustable Rate Mortgage) loans.

Makes sense, non? Banks lend you money for a mortgage. Who lends money to the banks? Other banks, mais oui! And that’s where the LIBOR comes in.

If you’re more mathematically inclined:

If Index + Margin = ARM (Adjustable Mortgage Rate)… or your interest rate on your mortgage

And if Index = LIBOR

Then we substitute in LIBOR, and we get: LIBOR + Margin = Mortgage Rate

It matters more than ever now, because the LIBOR (remember, the index benchmark rate for interbank loans), is starting to divert from the Federal fund rate that it used to follow so closely. It’s a gap of about 5.7% which is the highest it’s been in years.

Basically, what’s happening is other banks are worried that if they lend out money (short term), they won’t ever see it again. So the cost of borrowing goes up, and the LIBOR rises with it.

Basic economics – anything in scarce supply (like iPhones, no scratch that, a Hermes Birkin Bag), increases in demand (and usually, price, if so inclined – think back to the unlocked iPhones sellin’ on Ebay for a grand each when the actual phone was only $599 and now $399)…

And since the index (LIBOR) is going up, going back to our equation above – your mortgage rate will rise as well, because banks who lend money to you, still want to pull a profit over how much it costs them to borrow money, to lend to you.

Tu comprends?

This is too funny

From the flight deck before takeoff: I’m only gonna say this once: You have to turn off your laptop, iPod, Game Boy, CD player, BlackBerry, blueberry, strawberry, cherry, and Halle Berry — yes, you have to turn her off, too! You have to turn off anything that isn’t keeping you alive.

JetBlue flight

Makes me want to try one of their flights, just for the hell of it. I’ve only been on boring flights with boring stewards and stewardesses.

Rebecca @ The Space Between My Peers, had a great post on closet organization.

I particularly like this tip:

Beth wondered about sweater storage, now that all my social, business, and casual clothes will be in my closet. Ideally one’s closet would feature shelves. Mine has one, so here’s my plan: I am going to fold my better sweaters, put them in shirt boxes, and stack the boxes on the one existing shelf. A stack of boxes is much tidier than a stack of sweaters!

I think that’s a GREAT idea to fold your better sweaters and put them in shirt boxes. I hate having to pull out a sweater from the bottom and have the whole pile tumble on me… (although I do love spending time organizing my closet for fun )

And as for my comment, I am very interested in organizing Accessories, so for my previous closet, I designed the following (cheap) solution:

Necklaces

I put them on those little plastic hooks you buy from 3M with the sticky back (or whatever else that has hooks that would look cute to attach to your closet wall). Works like a charm, and instead of having your necklaces tangle up inside one of another in a big box, it’s all carefully separated by hooks, and by style. The super big beaded necklaces that don’t really tangle, are placed with ONE delicate tangly necklace, and I make sure that 2 tangly necklaces don’t go together on the same hook. Plus, they’re hard to separate or figure out what’s on there, if you have 15 of the same looking kind of silver, delicate necklace on one hook.

Earrings

For $5 or less, buy a plastic boxed container originally meant for beads at any craft store, or even the ones they use for fishing lures… stick your earrings in pairs, in each of the boxes That’s how I store all of mine. And they are separated, easy to see at a glance what you have, and even if you don’t have pierced ears, and cannot hang your earrings on little hooks or through beadboard (a board with holes), you can still separate them nicely. Another alternative would be to buy a big corkboard, stick thicker pins organized in sections, and hang your earrings from them. Voila.

Bracelets

Use the hook system, or you can go cuter, and buy glass containers and put the bigger beaded bracelets (and necklaces) in there, and fish them out when you need them. Or, just lay them out on a piece of colourful cloth, so you can see your bangles, cuffs and delicate charm bracelets all at once.

Rings

I just use a little shallow bowl for this.

Lastly: I keep my sterling silver necklaces and earrings in plastic baggies to avoid tarnishing them (via oxidation)…

Shoes

I use a shoe rack… but if I had cash, I’d love something like this built in!