In one of our previous articles (Recent changes to the prescribed rate of interest) we looked at the Prescribed Rate of Interest Act and we explained that it provides for the calculation of interest at a prescribed rate on an interest-bearing debt where the rate is not governed by any law, agreement or otherwise.
We also explained that –
- the prescribed rate of interest was calculated as the repo rate plus 3.5%.
- When the Reserve Bank changes the repo rate a new prescribed rate of interest becomes effective from the first day of the second month following the month of the new repo rate announcement.
- The applicable rate of interest for any debt is the rate that is in effect on the due date for payment or the date of demand for payment where there is no fixed due date.
- That rate will continue to apply even if the prescribed rate of interest changes at a later date.
There have since been many changes to the repo rate, the latest being that on 26 June 2020, the Minister of Justice and Correctional Services published a reduced prescribed rate of interest (legal interest), for the purposes of the Act.
The rate of interest has dropped from 7.25% to 7% , with effect from 1 September 2020.
Here is a table of the changes in the prescribed rate since 1993:
| Date range | Rate of interest |
| 1 October 1993 – 31 July 2014 | 15.5% pa |
| 1 August 2014 – 29 February 2016 | 9% pa |
| 1 March 2016 – 30 April 2016 | 10.25% pa |
| 1 May 2016 – 31 August 2017 | 10.50% pa |
| 1 September 2017 – 30 April 2018 | 10.25% pa |
| 1 May 2018 – 31 December 2018 | 10% pa |
| 1 January 2019 – 31 August 2019 | 10.25% pa |
| 1 September 2019 – 29 February 2020 | 10% pa |
| 1 March 2020 – 30 April 2020 | 9.75% pa |
| 1 May 2020 – 31 May 2020 | 8.75% pa |
| 1 June 2020 –30 June 2020 | 7.75% pa |
| 1 July 2020 – 31 August 2020 | 7.25% pa |
| 1 September 2020 – | 7.00% pa |
