All terms
Basis Point (bps)
One one-hundredth of one percent (0.01%). Used to express interest-rate changes, loan spreads, and fees.
Definition
A basis point equals 0.01%, so 100 basis points equal 1.00%. Lenders and investors quote rate moves, credit spreads, and origination or servicing fees in basis points to avoid ambiguity between percentage points and percent-of-percent language. A 30 basis point fee is 0.30% of the loan amount. Small bay borrowers see basis points on rate quotes (for example, SOFR + 225 bps), commitment fees, and rate-lock pricing.
Formula
1 basis point = 0.01% = 0.0001 in decimal formExample
A lender quotes a 30 bps origination fee on a $1,500,000 loan. Fee = 0.003 × $1,500,000 = $4,500.
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