Basis Point
Direct definition
One one-hundredth of a percent — 0.01% — used to describe changes in interest rates and yields.
Written by the Vabasso Mortgage Editorial Team · Reviewed against agency and federal sources · Read our editorial policy for how we research and review mortgage content
Plain-English explanation
Financial professionals talk in basis points to avoid confusion. Twenty-five basis points equals a quarter of a percentage point.
Why it matters
Small basis-point moves on a large loan add up: 25 basis points on $500,000 for 30 years can mean tens of thousands of dollars of interest.
Where you may see it
- Rate sheets
- Loan Estimate
- Market commentary
A real-world example
If rates fall from 6.75% to 6.50%, that's a 25-basis-point drop.
Educational and illustrative only
A common misunderstanding
A basis point is not the same as a percentage point — 100 basis points equal one percentage point.
Ask Vabasso AI
This glossary provides general educational information. Mortgage terminology, qualification methods, forms, timelines, fees, program rules, and legal meanings may vary by lender, investor, loan program, property, occupancy, state, and transaction. Definitions do not represent loan approval, legal advice, tax advice, or a commitment to lend.
- Author
- Vabasso Mortgage Editorial Team
- Reviewed by
- Vabasso Mortgage Licensed Advisory Team
- Last reviewed
- July 30, 2026