“America’s homeowners are going to get uncomfortably familiar with ‘LIBOR’ starting next month,” the New York-based Citigroup analysts wrote.
Libor rates have soared since the bankruptcy of Lehman Brothers Holdings Inc. last month as financial companies hoard cash.
The average subprime borrower facing an adjustable payment for the first time next month would face a monthly payment increase of about 18 percent based on Libor rates as of Sept. 30, rather than the 10 percent that would have occurred based on the rates on Sept. 15, the analysts wrote. The payment would be $1,951, instead of $1,807, they said. Fannie Mae and Freddie Mac loans would be boosted to $1,021 on average, instead of $904.
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