Interest Rate
Cost of borrowing; return on savings.
Formula
Interest Payment = Principal × Interest Rate × Time
Real World
When the Bank of England raised its base rate from 0.1% to 5.25% between 2021 and 2023, millions of UK mortgage holders on variable rates saw monthly repayments jump by hundreds of pounds, cutting household disposable income.
Exam Focus
Distinguish between the effect on borrowers (costs rise) and savers (returns rise) — one-sided answers lose evaluation marks.
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