Basis Point Definition

A basis point is a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument. One basis point is equal to 1/100th of 1%, or 0.01%.

For example, if the interest rate on a loan increases from 6% to 6.5%, that is a 50 basis point increase. If the interest rate decreases from 6% to 5.5%, that is a 150 basis point decrease.