Interest and interest rates: what they mean and how they're calculated

The interest rate is the price you pay for borrowed money, expressed as a percentage per year (p.a.). Interest is the amount in euros you actually pay because of that rate. On a €100,000 mortgage at 4% p.a., the interest for the first month is €333.33. With each payment the debt falls, and so does the monthly interest.

A mortgage rate is not the same as the APRC, the market average rate or the ECB policy rate. Below we explain the differences with simple examples.

How interest is calculated from the rate

With monthly repayments, the bank calculates interest on the outstanding balance:

interest for the month = outstanding balance × annual rate ÷ 12

With a balance of €100,000 and a rate of 4%, that’s 100,000 × 0.04 ÷ 12 = €333.33. When the balance falls, you pay less interest at the same rate.

Banks may count interest by the actual number of days, have a shorter or longer first period and round differently. Our examples are simplified monthly calculations, not a specific bank’s repayment schedule.

How the payment splits into interest and principal

Mortgages are usually repaid as an annuity. At a constant rate you pay the same amount every month. Only its make-up changes: the interest is paid first and the rest reduces the principal, the debt itself.

€100,000 loan at 4%	Monthly payment	Interest in 1st payment	Principal in 1st payment	Total interest
20 years	€605.98	€333.33	€272.65	€45,435.28
25 years	€527.84	€333.33	€194.50	€58,351.05
30 years	€477.42	€333.33	€144.08	€71,869.51

The first month’s interest is the same for every term because it depends only on the balance and the rate. With a longer term, however, the principal falls more slowly and you pay interest for longer. The “total interest” column only applies if the rate stays the same for the whole term. With a fixation shorter than the term, it’s just a scenario.

For comparison: at a zero rate, the payment on €100,000 over 20 years would be €416.67, all of it going towards the principal.

Percent and percentage points

A change in a rate is given in percentage points. If a rate rises from 3% to 4%, it has gone up by 1 percentage point. In relative terms the rate has risen by a third. The monthly payment doesn’t rise by a third, though, because a large part of it is repayment of principal.

Example for a €100,000 loan over 20 years:

Rate	Monthly payment	Interest in 1st payment	Total interest at a constant rate
4%	€605.98	€333.33	€45,435.28
5%	€659.96	€416.67	€58,389.38

A rise of 1 percentage point increases the payment by €53.98 a month, or roughly 9%.

Rate discounts are also given in percentage points. Slovenská sporiteľňa’s refinancing page (checked 19 October 2026), for example, lists a discount of 0.50 percentage points for an account and 0.20 points for loan insurance. Compare offers with and without a discount including the payment and the cost of the account or insurance premiums, not just the rate.

Interest rate and APRC

The annual percentage rate of charge (APRC, RPMN in Slovak) includes fees and mandatory services that are a condition of the loan, as well as interest. It is calculated from the exact dates of all payments. That’s why it’s usually higher than the interest rate alone.

According to NBS statistics published by the ECB, in August 2026 the average interest rate on new housing loans in Slovakia was 3.73% and the average APRC was 3.97%. This is an average weighted by loan volume and includes refinancing and changes to existing loans. It isn’t the rate you will get.

Total interest divided by the loan amount is not the APRC. For a specific contract concluded after 1 January 2022, you can check the APRC indicatively with the NBS APRC calculator. When comparing offers, use the APRC and representative examples with the same amount and term.

Fixation and term

• Fixation is the period during which the rate doesn’t change, such as 3 or 5 years.
• Term is the whole repayment period of the loan, usually at most 30 years.

When the fixation ends, the bank offers you a new rate. The payment is then recalculated from the remaining principal and the remaining term. Nobody knows the future rate in advance. That’s why, when assessing an application, the bank tests whether you could afford the payment at a rate at least 2 percentage points higher, but at no more than 6%. For fixations longer than 10 years, 1 point is enough. The test doesn’t apply to a rate fixed for the whole term.

The guide to interest rate fixation explains how to choose the fixation length. When the fixation ends you can also repay the loan free of charge; see the guide to early repayment.

The ECB policy rate and your mortgage rate

The European Central Bank sets monetary policy rates for the whole euro area. A mortgage rate can’t be calculated directly from them. Banks set their own prices, and your mortgage rate doesn’t change during the fixation, whatever the ECB decides.

The latest changes to ECB rates according to the official ECB table (checked 19 October 2026):

In effect from	Deposit facility	Main refinancing operations	Marginal lending facility
11 June 2025	2.00%	2.15%	2.40%
17 June 2026	2.25%	2.40%	2.65%
16 September 2026	2.50%	2.65%	2.90%

These figures are observations as of the dates shown, not a forecast. A mortgage rate can’t be worked out from the ECB rate.

Try the calculation

In the mortgage calculator you enter the loan amount, rate and term and see the payment, total interest and the payment at a rate 1 and 2 percentage points higher. The income-based calculator shows how much you can borrow.