The impact of high interest rates on borrowing and economic activities has been a recurring theme in IELTS Writing Task 2, appearing in various forms over the past decade. This topic’s significance has grown with recent global economic challenges, making it increasingly relevant for test-takers. Let’s examine some impact of loan interest rates on borrowers through carefully crafted sample essays.
Analysis of Question Type
Some people think that high interest rates discourage people from borrowing money from banks, while others believe they are necessary to control inflation. Discuss both views and give your opinion.
This question requires a balanced discussion of both perspectives while clearly stating your position. The task involves:
- Examining how high interest rates affect borrowing behavior
- Analyzing the role of interest rates in controlling inflation
- Providing a well-reasoned personal viewpoint
Sample Essay 1 (Band 8.0)
The debate over whether high interest rates serve as a deterrent to borrowing or act as a necessary economic tool has garnered significant attention. While both perspectives hold merit, I believe that elevated interest rates play a crucial role in maintaining economic stability despite their impact on borrowing patterns.
High interest rates undeniably discourage borrowing from financial institutions. When rates increase, the cost of servicing loans becomes substantially higher, making individuals and businesses think twice before taking on debt. For instance, potential homebuyers might postpone their purchase decisions when how rising mortgage rates affect buyers shows significant increases in monthly payments. Similarly, businesses may delay expansion plans when borrowing costs become prohibitive.
However, the role of high interest rates in controlling inflation cannot be understated. Central banks worldwide use interest rates as a primary tool to manage price stability. When inflation threatens economic stability, raising interest rates helps reduce money supply and consumer spending, thereby controlling price increases. This monetary policy tool has proven effective in many economies, as demonstrated by how interest rates influence real estate values.
In my opinion, while high interest rates may temporarily constrain borrowing activities, their importance in maintaining economic stability outweighs these short-term disadvantages. A controlled inflation environment ultimately benefits both borrowers and lenders by ensuring long-term economic sustainability.
Sample Essay 2 (Band 6.5)
Many people have different opinions about high interest rates. Some think they stop people from getting loans, while others say they help control inflation. I will discuss both sides and give my opinion.
First, high interest rates make borrowing money very expensive. When banks charge high interest, people have to pay back much more money than they borrowed. This makes many people afraid to take loans. For example, if someone wants to buy a house, they might wait until interest rates go down because the monthly payments would be too high.
On the other hand, high interest rates help control inflation. When prices keep going up too fast, the government can use high interest rates to slow down spending. This helps keep prices stable. How interest rates impact stock market trends shows this clearly.
I think high interest rates are necessary even though they make borrowing harder. Without them, inflation could get very bad and hurt the economy more. However, banks should be careful not to make rates too high.
Analysis of Band Scores
Band 8.0 Essay Analysis
- Sophisticated vocabulary and complex structures
- Clear organization with logical progression
- Strong topic sentences and transitions
- Balanced discussion with well-supported arguments
- Precise use of examples and evidence
Band 6.5 Essay Analysis
- Simple but clear language
- Basic organizational structure
- Some repetition in vocabulary
- Limited use of complex sentences
- Examples are general rather than specific
Key Vocabulary to Remember
- monetary policy (n.) /ˈmʌnɪtəri ˈpɒləsi/ – government or central bank actions to control money supply
- inflation (n.) /ɪnˈfleɪʃən/ – general increase in prices over time
- deterrent (n.) /dɪˈterənt/ – something that discourages an action
- prohibitive (adj.) /prəˈhɪbɪtɪv/ – so high or burdensome as to prevent use or action
- servicing loans (phrase) /ˈsɜːvɪsɪŋ ləʊnz/ – making regular payments on borrowed money
Interest rates influence multiple economic factors including inflation and borrowing
Consider practicing with similar topics like “The role of central banks in economic stability” or “Impact of monetary policies on small businesses” to enhance your writing skills.
