Property Mortgage Loan interest RateInterest rate for real estate mortgage loans
Firstly, by restricting the interest rate, it precludes creditors from dealing with the current risks of a defaulting loan. Secondly, Section 8 concerns only interest on mortgage -backed loan interest. For example, a creditor is not forbidden to register a right of lien on an individual's property and to charge a higher interest rate in the event of arrears.
If, however, a creditor borrows a mortgage (i.e. a mortgage for a loan granted for a purpose other than or in connection with the acquisition of property, such as a revolving loan, or safeguards monies presented in the Personal Property Registry) and borrows a mortgage that safeguards all the debtor' s liabilities, the creditor continues to be barred from charge a higher interest rate in the event of failure.
The reason for this is that the mortgage covers both credits on the basis of its conditions and thus makes use of Section 8. Here, on a 13-month, 22-day loan, the creditor calculated 14% interest for the first 12months and 20% interest for the rest of the year. Probably the thought was that the loan was more likely to fall behind towards the end of the maturity and the creditor tried to hedge against this eventuality.
It confirmed the interest rate hike and found that the rule did not contravene 8 of the Interest Act because, in its view, the higher interest rate applies both to default and to funds not in default. At Grandville Savings and Credit Union v. Pekich, the mortgage provided for interest rates of 9%, which rose to 14% on all capital due one months before due date.
As the Court of Queen's Bench found, the mortgage is not in breach of Section 8 as the rise in the interest rate is due not to delay but to the course of overtime. Creditors wishing to take protection in the event of failure should be mindful of these choices and consider recourse to such protection, particularly in a highly competitive world.