25 basis points equals 0.25%, or one-quarter of one percent. To convert any number of basis points to a percentage, divide by 100. So 25 ÷ 100 = 0.25%. As a decimal, that’s 0.0025.
What Basis Points Are
A basis point is 1/100th of a percentage point. Finance professionals use basis points (often abbreviated “bps” and pronounced “bips”) instead of percentages to avoid ambiguity. Saying an interest rate “increased by 1%” could mean it went from 5% to 6%, or it could mean it went from 5% to 5.05%. Saying it “increased by 100 basis points” removes the confusion: the rate went from 5% to 6%.
Here’s how common basis point values translate:
- 1 bps = 0.01%
- 10 bps = 0.10%
- 25 bps = 0.25%
- 50 bps = 0.50%
- 100 bps = 1.00%
How to Convert Basis Points Yourself
The formula works in both directions. To go from basis points to a percentage, divide by 100. To go from a percentage to basis points, multiply by 100. If your savings account rate drops by 0.75%, that’s a 75 basis point decrease. If a bond yield rises by 12 bps, it went up 0.12%.
To get the decimal form (useful for plugging into calculations), divide the basis points by 10,000. For 25 bps: 25 ÷ 10,000 = 0.0025. You’d use this decimal when calculating the actual dollar impact of a rate change on a loan balance or investment.
Where You’ll See 25 Basis Points
A 25 basis point move is one of the most common increments in finance. The Federal Reserve typically adjusts its benchmark interest rate in 25 basis point steps. When the Fed raises or cuts rates by 25 bps, that quarter-point shift ripples through mortgage rates, credit card APRs, savings account yields, and auto loan pricing.
You’ll also encounter 25 bps in investment fund fees. An expense ratio of 0.25% (25 bps) on a $50,000 portfolio costs you $125 per year. On a $200,000 portfolio, that same 25 bps costs $500.
What 25 Basis Points Means for a Mortgage
On a 30-year mortgage, a 25 basis point difference in your interest rate changes your monthly payment by roughly $33 to $99, depending on loan size. On a $400,000 loan, locking in a rate that’s 0.25 percentage points lower saves about $66 per month. Over the full 30-year term, that adds up to nearly $24,000 in interest.
This is why mortgage shoppers compare rates down to the eighth of a point. Even small differences in basis points compound into meaningful money over the life of a long-term loan.