U.S. Mortgage Index

Basis point

Definition

A basis point is one one-hundredth of a percentage point. Official market material uses it to describe small interest-rate changes. It is a unit of measure, not a loan product and not a rate quote.

In plain English

Mortgage rates are often discussed in very small steps. A basis point is the unit for those steps: one one-hundredth of a percentage point. A change of 100 basis points is a one-percentage-point change. The unit does not say whether a quoted rate is a good offer.

Technical definition

The Federal Reserve reform glossary is PRIMARY. It defines a basis point as one one-hundredth of a percentage point.

Why it matters

Lock and pricing conversations use bps and bp as shorthand. Readers need the unit kept distinct from a product name or a recommended rate.

Example

A one-percentage-point rate change equals 100 basis points.

Sources reviewed