FIRSTLY - WHAT IS INTEREST?:

When a family member lends you money for you to pay them back it is usually settled when they receive the total amount back from you.If they wanted more than what they lent you in the first place on top of what you borrowed this premium on top would be 'interest'.In Britain,the MPC (Monetary Policy Commitee) sets the interest rate or premium it charges for lending major banking institutions money from its reserve.This is called the 'base' rate.The interest on a mortgage is always surplus of this to ensure the banks create a healthy profit margin for themselves.However if the base rate falls,a bank will be willing to lower its interests rates charged in order to remain competive.This is why mortgage deals are constantly changing as they are continually adjusting to economic conditions.