Compounding The Felony

The hidden, devastating, effects of compound interest have been considered in a previous GD Online article ( Extreme Service Charge; June 2015) concerning service charge payments in residential leases of holiday chalets on the Gower peninsula. Some of the leases, granted in the early 1970s for terms of 99 years, reserved a fixed annual service charge,  beginning with £90 for the first year but increasing  annually by 10% of the amount paid in the previous year. The result was that in 2012, the service charge was £3,366 and in 2072, the final year of the lease, it will be £1,025,004. The annual increase at 10% compound, a remorseless process of compounded yearly increases, rendered the lease an onerous contract.