The Department of Trade and Industry recently updated the maximum fees that credit providers are able to charge.
There has been a change in how interest rates are calculated as well as a general reduction in the maximum interest rates charged.
According to the Department of Trade and Industry, the new maximum interest rates for all types of credit agreements will reduce the cost of credit for consumers.
The final regulations will bring about reduction of cost of credit when consumers are applying for credit
says Sidwell Medupe, spokesperson, DTI.
The new regulations will come into effect in May this year and will set a standard of maximum calculated amounts which credit providers will not be allowed to exceed or abuse.
Currently the maximum interest that can be charged for home loans is 2,2 times the repo rate plus 5 percentage points. At current interest rates that would be 18,2% per annum. The new rate will be a maximum of 12 percentage points above the repo rate, or 18% per annum.
The new regulations will affect mortgage-initiation fees (what lenders may charge to consumers when they take out a loan) as follows: R1,100 plus 10% of the amount in excess of R10,000. The maximum charge must never be more than R 5 985 (R5,250 + VAT).
This article originally appeared in Neighbourhood, Sunday Times.