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Here's how the Secured Overnight Financing Rate works and why it might matter for your mortgage

The article from MSN Money discusses the Secured Overnight Financing Rate (SOFR), which has become a key benchmark interest rate in the U.S. following the decline of the London Interbank Offered Rate (LIBOR). SOFR is based on transactions in the Treasury repurchase market, where investors offer banks overnight loans backed by U.S. Treasury securities. This rate is considered more reliable and less susceptible to manipulation than LIBOR due to its foundation in actual transactions rather than estimates. The transition to SOFR affects various financial products, including adjustable-rate mortgages (ARMs), where the interest rate can change based on this benchmark. For homeowners, understanding SOFR is crucial as it influences mortgage rates; when SOFR rises, so do the interest rates on ARMs, potentially increasing monthly payments. The article also notes that while SOFR provides a more transparent rate, its volatility can lead to fluctuations in borrowing costs, impacting financial planning for both individuals and businesses.

Read the Full MSN Article at:
[ https://www.msn.com/en-us/money/economy/here-s-how-the-secured-overnight-financing-rate-works-and-why-it-might-matter-for-your-mortgage/ar-AA1xv8Pv ]