Small rate or pricing unit equal to one one-hundredth of a percentage point.
A basis point is a small rate or pricing unit equal to one one-hundredth of a percentage point.
Basis point matters because mortgage pricing often moves in small increments. Lenders, brokers, rate sheets, and market commentary may talk about rates or pricing changing by basis points instead of full percentage points.
It also matters because borrowers can easily misread the size of a change. A 25-basis-point rate move is 0.25 percentage points, not 25 percentage points.
Borrowers encounter basis-point language when comparing Rate Quote changes, rate-sheet adjustments, points, lock extensions, ARM index movement, or pricing commentary.
The term becomes practical when a lender says pricing improved by a few basis points, an ARM index changed, or an adjustment altered the quote.
| Basis points | Percentage-point change |
|---|---|
| 1 basis point | 0.01 percentage point |
| 10 basis points | 0.10 percentage point |
| 25 basis points | 0.25 percentage point |
| 100 basis points | 1.00 percentage point |
A lender says the quoted rate worsened by 12.5 basis points. In borrower terms, that is a 0.125 percentage-point change, not a change of 12.5%.
Basis point differs from Interest Rate because interest rate is the rate itself, while a basis point is a unit used to describe changes in rates or pricing.
It differs from Discount Points because discount points are upfront cost expressed as a percentage of the loan amount, while basis points are a measurement unit for rate or pricing movement.
It also differs from Price in Points because price in points describes the cost or credit attached to a rate option, while basis points measure small increments.