Basis Point Calculator

What is a basis point?

Finance uses basis points to describe small changes in rates and fees without confusion. 'The rate rose 1%' could mean from 5% to 6% (one percentage point) or from 5% to 5.05% (one percent of 5%). Saying 'the rate rose 100 basis points' can only mean 5% to 6%. A basis point is also called a permyriad – one part per ten thousand (‱).

Basis point formulas

• 1 bp = 0.01% = 0.0001
• 100 bps = 1% (one percentage point)
• Percent = bps ÷ 100; bps = percent × 100
• Dollar value = amount × bps ÷ 10,000

Basis points vs percentage points vs percent change

If a savings rate moves from 4.00% to 4.50%, that is a 0.50 percentage-point or 50 bp increase – but a 12.5% relative (percent) increase, because 0.5 is 12.5% of 4. Headlines sometimes mix these up; the calculator shows all three.

Basis point conversion chart

Basis points in real life

Mortgages and loans

On a $300,000 balance, 25 bps is $750 a year of interest at the start of the loan (300,000 × 0.0025). For a 30-year fixed mortgage, moving from 6.50% to 6.75% raises the monthly principal-and-interest payment from $1,896.20 to $1,945.79 – about $50 more a month, or roughly $17,852 over the full term if you never refinance or prepay. That is why borrowers shop around even for small rate differences, and why lenders price discount points in basis points too: one 'point' is 1% of the loan, or 100 bps of the balance paid upfront.

Central bank rates

Central banks usually move policy rates in steps of 25 bps (a 'quarter point'), sometimes 50 or 75 bps. Variable-rate loans and savings accounts linked to that rate typically follow, though not always one-for-one.

Bonds and spreads

Bond yields and spreads are quoted in basis points: a corporate bond yielding 5.40% when the government bond yields 4.20% has a spread of 120 bps. When yields rise, bond prices fall. A quick estimate is price change ≈ −modified duration × yield change × price. A $1,000 bond with a modified duration of 7 loses about 7 × 0.0025 × $1,000 = $17.50 (1.75%) if its yield rises 25 bps.

Fund fees and expense ratios

Fund expense ratios are often quoted in bps. A 0.45% fund costs 45 bps a year and a 0.90% fund 90 bps – on $50,000 that is $225 versus $450 a year. Over decades the gap compounds: with a 6% return before fees for 30 years, $50,000 grows to about $252,765 at 45 bps and about $222,357 at 90 bps.

Commissions and deal fees

Large deals often state fees in bps. 250 bps on a $2,000,000 property is $50,000; a 20 bps arrangement fee on a $10 million loan is $20,000.

How to calculate the basis point change between two rates

1. Subtract the old rate from the new rate in percent: 5.35% − 4.90% = 0.45 percentage points.
2. Multiply by 100 to convert to basis points: 0.45 × 100 = 45 bps.
3. For the dollar effect, multiply the amount by the bps and divide by 10,000: on $250,000, 45 bps is $1,125 a year.

Index plus margin: loans quoted in basis points

Many variable-rate business loans, adjustable mortgages and bonds are priced as an index plus a margin – for example SOFR + 250 bps. If SOFR is 4.30%, the loan rate is 4.30% + 2.50% = 6.80%. When the index moves 25 bps, your rate moves by the same 25 bps; the margin stays fixed unless the contract says otherwise.

Common mistakes with basis points

• Confusing a 50 bp rise with a 50% rise – from 4% to 4.5% is 50 bps, not 50%.
• Moving the decimal the wrong way: 7.5 bps is 0.075%, not 0.75%.
• Forgetting that loan payments do not rise in proportion to the rate – use the mortgage mode instead of multiplying.
• Comparing fund fees without including all costs (some funds also charge loads or platform fees).

Why professionals prefer basis points

In bond, loan and fund markets, differences of a few hundredths of a percent move large sums of money. Quoting in whole numbers of basis points avoids long decimals and removes the 'percent of a percent' ambiguity. Traders even quote half or quarter basis points for very liquid government bonds.

Sources

1. Investor.gov (SEC) – Basis point definition and mutual fund fees — investor.gov
2. CFPB – Mortgage discount points — consumerfinance.gov