India, Oct. 1 -- BBook a fixed deposit at seven per cent and it pays seven per cent until the day it matures, whatever happens to interest rates in the meantime. Take a mortgage from the very same bank, though, and its rate can rise or fall several times over the years you spend repaying it. Same bank, same customer, two rates that behave in opposite ways, and the difference isn't arbitrary.
It comes down to what kind of contract each one is, and who is meant to carry the risk of rates moving. Once that's clear, the puzzle dissolves, and you can see whose side each arrangement is really on.
Same bank, two rates behaving differently
The instinct is to assume a rule lets one change and freezes the other, but that isn't it. Both rates could,...