The core idea
Interest compensates a lender and costs a borrower. Compare annual rates and fees when evaluating borrowing.
A little more context
Central banks influence short-term rates. Higher borrowing costs can cool spending, but effects take time and are uncertain.
What to remember
New bonds with higher yields make older fixed payments less attractive. Longer-duration bonds are generally more sensitive.
Pause and reflect: how would you explain this idea to someone who has never invested?