What are the changes to the Finance House Base Rate?

The Finance House Base Rate (more commonly referred to as the FHBR) was for many years in common use by UK lenders and finance houses who used it as an independent reference point to set their own interest rates for lending. This lending was usually for commercial lending contracts where rates could vary during the lending period.

The FHBR was set by on a monthly basis by the Finance & Leasing Association (FLA), which determined the rate by calculating the average cost of three-month money in Sterling LIBOR (London Interbank Offered Rate) over the previous eight weeks. This was then rounded up to the next half-point. The rate would only ever change if the calculation resulted in a different number.

The FHBR was widely used as it was considered more reliable and reactive to economic changes and fluctuations than either LIBOR and the Bank of England base rate.

It was announced by the FLA on 29 March 2019 that the FHBR would cease to be published on 31 December 2019. This decision was taken following the FLA’s decision not to become an authorised benchmark administrator, as would have been required by European Union regulations.
From 1 January 2020, the FLA has calculated and published mathematical adjustments to three-month Sterling LIBOR. Lenders affiliated to the biggest trade associations were advised to change to using the BoE Base Rate as a reference point.

More information about the now-defunct FHBR can be found on the Finance & Leasing Association’s website . Alternatively, you can take a look at our simple guide to asset finance.