Definition

Noun: - The percentage of a sum of money charged for its use: An interest rate is the cost of borrowing money or the reward for saving money, expressed as a percentage of the principal amount over a period of time, usually one year.

Usage

The term "interest rate" is used to discuss the cost of loans (e.g., for a mortgage or car) and the return on savings or investments (e.g., in a bank account). It is a key concept in finance and economics. - It is typically modified by adjectives like high, low, fixed, or variable. - It is often discussed in the context of central bank policies, inflation, and economic growth.

Examples

• Noun:
  • The central bank raised the interest rate to combat inflation.
  • I'm looking for a savings account with a competitive interest rate.
  • The loan has a fixed interest rate of 5% for the first five years.

Advanced Usage

• "to set an interest rate": The action of a central bank or financial institution determining the official rate.
  • The Federal Reserve will set the interest rate at its next meeting.
• "interest rate environment": Refers to the general level and trend of interest rates in an economy.
  • Investors must adapt to the current low interest rate environment.

Variants and Related Words

• Rate of interest: A less common, formal synonym for "interest rate."
  • The annual rate of interest is clearly stated in the contract.
• APR (Annual Percentage Rate): A broader measure of the cost of borrowing that includes the interest rate plus other fees, expressed as a yearly percentage.
• Base rate / Prime rate: A benchmark interest rate set by a central bank or a country's leading banks, upon which other rates are based.

Synonyms

• Finance charge rate: (Formal) Emphasizes the cost aspect of borrowing.
• Cost of capital: (Business context) The return rate expected by those who provide capital.

Related Phrases

• Interest rate hike / increase: A rise in interest rates.
  • Consumers are worried about another interest rate hike.
• Interest rate cut / reduction: A decrease in interest rates.
  • The interest rate cut is intended to stimulate the economy.
• To be sensitive to interest rates: To be significantly affected by changes in interest rates.
  • The housing market is highly sensitive to interest rates.

Noun

1. the percentage of a sum of money charged for its use