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Prescribed Rate of Interest Act Changes Explained

7 March 2016 No Comment

The Prescribed Rate of Interest Act (Act 55 of 1975) sets the maximum rate of interest that can be charged on mora interest (over-due payment) and is also used in court orders relating to damages claims.

Mora interest applies where payment is due and the rate of interest has not been agreed between the parties. In order for a creditor to become entitled to such interest there has to be demand made for payment or a due date for payment. The creditor is then entitled to charge mora interest from such date as prescribed in the Prescribed Rate of Interest Act.

In the democratic South African regime, the prescribed rate seemed to get stuck at 15,5% per annum for a long period of time, notwithstanding fluctuations in SA Reverse Banks repurchase rate (commonly called the Repo rate), the rate which had previously influenced changes in the prescribed rate of Interest. This rate of 15,5% per annum operated between 1st October 1993 up to 31st July 2014.




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