Home owners could benefit from legal decision

Published May 27, 1998

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You could be in the pound seats when the Appeal Court rules on a recent Gauteng High Court decision telling banks that they cannot change interest rates on your home loan at their sole discretion.

The Appeal Court decision could have significant consequences for you, depending on the wording of your home loan contract.

The Gauteng court ruled that fluctuations in interest rates on home loans are invalid, unless the interest rate is linked to something ascertainable and you agree to it.

If the decision is upheld in the appeal court, the result could affect borrowers differently. The two main effects are:

* If you were granted a loan at a low interest rate and the rates increased you could find yourself sitting pretty as the banks would have to repay you all the interest that you overpaid; but

* If you were granted a loan at a high interest rate and the interest rate comes down, your bank, in terms of the court ruling, may be able to demand a payback from you.

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