Statutory Interest Rate Changes
Tuesday, 18 June 2002
The interest rate courts can award for the recovery of debts or damages will be reduced to bring it into line with current market borrowing rates, Associate Justice Minister Margaret Wilson said today.
The new rate of 7.5 per cent will take effect from 1 August 2002.
“A review of the interest rates set down in certain statutes was long overdue,” Margaret Wilson said. “Most are currently set at 11 per cent while first mortgage interest rates average 7.75 per cent.”
The Judicature Act 1908, the District Courts Act 1947, the Disputes Tribunals Act 1988, allow the courts and the Disputes Tribunal (as appropriate) to award interest, not exceeding the "prescribed" rate (currently 11 per cent), for the recovery of debts or damages. The Trustee Act 1956 provides for the recovery of interest (currently six per cent) for trustees who pay insurance policy premiums. In all cases interest is simple, not compound. These statutes also allow the Governor-General in Executive Council to adjust the set rates.
Wilson said the change is also necessary because the rate
set down in the Judicature Act is used by a number of other
statutes. These include the Companies Act; Injury
Prevention, Rehabilitation, and Compensation Act; Land
Transfer Act; Life Insurance Act; Maori Reserved Land
Amendment Act 1997; Mutual Insurance Act; and the High Court