Change in the Prescribed Rate of Interest

by | Oct 2, 2019 | General Law

Change in the Prescribed Rate of Interest

If two or more parties conclude an agreement, such agreement may stipulate the interest rate that a party must pay on a debt in the event of timeous non-payment. If the other party is compelled to institute legal action against the defaulting party, then the interest rate that will accrue on the debt shall be such interest as reflected in the agreement.

 This article does not deal with the maximum interest rate chargeable to an individual in terms of the National Credit Act 34 of 2005 (NCA). By way of background, the current repo rate in South Africa is 6.5% per annum.

 If an agreement is silent regarding the interest rate (in other words the parties have not discussed or agreed on the interest rate which will be charged on a debt in the event of timeous non-payment), then the legal rate as prescribed in terms of the Prescribed Rate of Interest Act 55 of 1975 (Prescribed Act) shall apply.

 Effectively this means that if a party sues a defaulting party, then the interest rate charged in terms of the summons or application shall be the legally prescribed rate as reflected in the Prescribed Act.

 The prescribed rate of interest was changed with effect from 1 September 2019 to 10% per annum. The previous rate (from 1 January 2019 to 31 August 2019) was 10.25% per annum.

 In summary, interest accrues on a debt at the rate as agreed to in an agreement and failing any agreement then at the prescribed interest rate applicable.

MARIA D’AMICO
ATTORNEY AND SOLICITOR

© D’AMICO INCORPORATED ATTORNEYS

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Disclaimer

This article has been compiled for information purposes only and does not constitute legal advice. Legal advice needs to be tailored to the specific needs and circumstances of the case on hand. It follows that  D’Amico Incorporated cannot accept liability for any loss or damage caused to any individual or entity that has acted or omitted to act on the basis of this information.

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