The fee is set by supply and demand for the specific line, not by the broker's goodwill, and it is variable: a fee of 2% today can be 90% next week if lendable supply tightens. It accrues daily on the market value of the position, so a rally raises the dollar cost at the same time it raises the loss.
Any short thesis with a long horizon has to clear the fee before it makes money. This is the main reason obviously overvalued small caps can stay overvalued: the carrying cost exceeds what a patient short can bear.
Example: shorting $50,000 of stock at a 42% borrow fee costs $50,000 x 0.42 / 365 = $57.53 a day, about $1,750 a month. The stock must fall 3.5% a month just to cover the borrow.
Related: securities-lending, hard-to-borrow, rebate-rate, short-selling, utilization-rate