An interest rate is the price of money. When you borrow, the interest rate is what you pay for using someone else's money. When you save, it is what the bank pays you for letting them use your money. It is expressed as a percentage per year (per annum).
Interest rates come in two flavors: fixed (stays the same throughout) and variable/floating (changes with market conditions). A 30-year fixed mortgage at 7% means 7% for all 30 years. A floating-rate loan might start at 6.5% and move up or down based on the central bank's policy rate.
Interest rates drive the entire economy. The US Federal Reserve's rate decisions move trillions of dollars globally. Low rates encourage borrowing and spending (boosting growth); high rates discourage borrowing (cooling inflation). As of 2025, global interest rates are among the highest in 15+ years as central banks fight post-pandemic inflation.