Interest Rate
An interest rate is the cost of borrowing money or the reward for saving it.
1 min read Borrowing Money
What it means
An interest rate is the cost of borrowing money or the reward for saving it. It's shown as a percentage.
Example
A mortgage with a 4% interest rate will usually cost less than one with a 5% rate if everything else is the same.
Why it matters
Interest rates affect mortgages, loans, credit cards and savings accounts.
Even a 1% difference can make a significant difference over many years.
Why do interest rates change?
Many rates are influenced by the Bank of England base rate, although lenders set their own products.