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How are interest rates calculated? [Video]

14 January 2016

Interest rates affect the cost of borrowing money and how much you earn if you save it. An interest rate is generally expressed as an annual percentage.

Although the exact interest rates for various things like credit cards or mortgages are up to the individual lenders, they are limited by the repo rate set by the Reserve Bank and the ranges set by the National Credit Amendment Act.

If interest rates are low it costs less to borrow, which encourages people to spend more. This means that there is an increase in demand, which can be good for the economy as it means that businesses make more money.

Interest rates fluctuate in accordance with a variety of factors. Essentially, they are based on the supply and demand for funds. Should the demand for funds be high and the supply of funds low, interest rates will to be higher than they would be in times where demand is low and available capital is high.

Direct Axis likes to protect customers against the effect of interest rate increases. That's why all loans come with fixed repayments which will be the same for the full duration of the loan term, giving customers peace of mind and helping them to budget effectively.