What Is a Basis Point?

A basis point is one-hundredth of a percentage point. Small number, big bill — and it is how every rate you live with actually moves.

Share this: X · Email · Copy link

2 min read

What a Basis Point Actually Is

A basis point is one-hundredth of a percentage point.

That is the whole definition. One basis point is 0.01%. A hundred of them make a full percentage point. The word exists because in finance, the difference between 7.24% and 7.32% matters, and saying “eight-hundredths of a percentage point” every time would wear everybody out. So the market says “eight basis points.”

Here is the everyday example. This week’s Spark Board has the 30-year mortgage rate at 7.24%, down from 7.32% last week. That is a fall of eight basis points. On a $400,000 mortgage, eight basis points is roughly $20 a month — small on one payment, real over thirty years. The same move in the other direction is why a quarter-point Fed move gets so much attention: a quarter of a percentage point is 25 basis points, and on every loan in the country at once, 25 basis points is a lot of money changing hands.

The Fed speaks in basis points for the same reason. When two officials dissented this week in favor of a hike, they wanted 25 basis points — a quarter point, taking the range from 3.75% to 4.00% up to 4.00% to 4.25%. When traders say a December hike is “85% priced in,” they mean the market has already moved bond prices most of the way toward that 25-basis-point step, before the Fed has taken it.

Why it matters to your money: almost every rate you live with — your mortgage, your car loan, your savings account, your credit card — moves in basis points, even when nobody uses the word. The next time a headline says “yields rose 10 basis points,” translate it: borrowing just got one-tenth of a percentage point more expensive. Small number, big bill, and now you know how to read it.

Sources: Freddie Mac Primary Mortgage Market Survey, week ending October 29, 2026 (30-year rate 7.24%, down from 7.32%); Federal Reserve FOMC statement, October 28, 2026 (target range held at 3.75% to 4.00%; Cook and Hammack dissenting for a 25-basis-point hike).

Related Reading:

• The Spark Board — this week’s numbers, including the mortgage rate that fell eight basis points.
• The Spark Dictionary — plain-English definitions of the terms the site uses.
• Amazon’s Store Paid for the Cloud. It Still Wasn’t Enough. — this week’s post on Amazon’s earnings.