1. Risk: Higher risk borrower must pay higher rates on their borrowing, to compensate lenders for the greater risk involved. For example, government can borrow at lower rate than companies, because lending to government is generally considered a much lower risk. Similarly, lending to a large listed company is less risky than lending to a small start-up business, and large companies can therefore borrow at a lower cost.

2. The size of the loan: Administrative cost savings help allow lower rate of interest to be charged by banks on larger loans and higher rate of interest to be paid on larger deposit.

3. The need to make a profit on re-lending
Financial intermediaries make their profits from re-lending at a higher rate of interest than the cost of their borrowing.

4. Different types of financial asset
Different types of financial asset attract different rates of interest. This is largely because of the competition for deposits between different types of financial institution.

5. Maturity and duration
The causes of interest rate fluctuations include the structure of interest rate yield curve and changing economic factors. This is discussed below.