Summary

This topic covered Interest Rates.

Fixed Rates:

  • Fixed interest rates apply to the total amount borrowed and do not change during the term of the loan.
  • With fixed rates, customer repayments comprise capital repayment and interest.
  • The proportion of repayments made up of capital repayment increases toward loan maturity.

Variable Rates:

  • Variable rates of interest change with market conditions.
  • Usually, customer repayments will go up or down during the term of the loan as interest rates vary.
  • The actual rate charged depends on the Finance House Borrowing Rate (FHBR) and the lenders margin.
  • The amount of capital repaid is the same in each repayment, but the interest fluctuates.