The bank caclulates loan interest as "simple" interest -- for every payment period, multiply the current outstanding principal by the current interest rate to determine the interest payment.

That has undoubted appeal for policymakers in countries where floating-rate mortgages expose borrowers to the risk of payment shocks as rates rise.

Signs of strain are everywhere. In September the Department of Education reported that in 2009 the default rate, which is defined as non-payment for 270 days, had reached 8.8%.