Interest Rates - GCSE Business Definition

Interest rates are the price for the cost of borrowing money or the reward for saving money. Interest rates are expressed as a percentage of the amount borrowed or saved. For a loan, it is the percentage charged by a lender to a borrower for the use of their money over a time period. For savings, it is the percentage that financial institutions pay to account holders for keeping their money deposited with them. Understanding interest rates is crucial for students studying GCSE Business, as they influence consumer spending, business investment, and the overall economy. Changes in interest rates are often set by a country's central bank, like the Bank of England. They affect the cost of loans, mortgages, and the returns on savings, which impact both personal and business financial decisions.