This topic covered Interest 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 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.