In short
Where the National Credit Act governs a loan, interest is capped by regulation against the Reserve Bank repurchase rate, RR. Mortgage agreements are capped at RR plus 12% a year. Credit facilities at RR plus 14%. Unsecured credit transactions at RR plus 21%. Other credit agreements at RR plus 17%. Short-term transactions at 5% a month on a first loan and 3% on later ones in the same calendar year. These caps have applied since 6 May 2016 and replaced an older formula that is still widely quoted. The Act also limits what may be charged at all: section 101 sets a closed list, so a fee outside it may not be made whatever it is called. Where the Act does not govern the loan there is no prescribed cap.
There is a maximum interest rate in South Africa, but only for loans the National Credit Act governs. Where the Act applies the caps are fixed by regulation and they move with the Reserve Bank's repurchase rate. Where it does not apply there is no prescribed cap at all.
01 — The figuresThe current maximum rates
RR is the ruling South African Reserve Bank repurchase rate, and interest here means the annual rate calculated as the Act prescribes. Because the caps are expressed against it, they move whenever the repo rate moves — so the ceiling is a formula, not a number you can memorise once.
| Type of credit | Maximum interest rate |
|---|---|
| Mortgage agreements | RR + 12% per year |
| Credit facilities | RR + 14% per year |
| Unsecured credit transactions | RR + 21% per year |
| Developmental credit agreements | RR + 27% per year |
| Short-term transactions | 5% per month on a first loan, 3% per month on later loans in the same calendar year |
| Other credit agreements | RR + 17% per year |
| Incidental credit agreements | 2% per month |
The regulations apply to agreements entered into on or after 6 May 2016. A loan written before then is governed by the caps in force when it was made.
02 — The rest of the priceInterest is not the only thing capped
A lender who stays under the interest cap can still be charging unlawfully, because the Act limits what you may charge at all before it limits how much.
Section 101 gives a closed list. If a charge is not on it, you may not make it, whatever you call it:
- the principal — the money you advanced;
- an initiation fee, capped, and only if the application actually results in a loan;
- a service fee, capped;
- interest, capped as above;
- the cost of credit insurance, within limits;
- default administration charges, only once the borrower has defaulted;
- collection costs, capped.
The initiation fee has its own ceiling
On a mortgage agreement the initiation fee is R1 100 plus 10% of the amount above R10 000, and it may never exceed R5 250. Other categories have their own figures.
So an arrangement fee, a documentation fee, a consulting fee or a fee for assessing the file is not a capped charge — it is a charge that may not be made at all.
03 — The gapWhere the caps do not reach
This is the part that matters most to private lenders, and it is rarely stated plainly. The caps apply only where the National Credit Act governs the agreement.
Lending to a business above the thresholds — a company, close corporation, body corporate or qualifying trust — is very often outside the Act. Where that is so there is no prescribed maximum interest rate and no closed list of permitted charges.
This is one of the few respects in which being outside the Act helps a lender. It is worth being honest that it is a narrow exception. The statute otherwise runs the other way, as understanding the National Credit Act sets out.
04 — The boundaryWhat this page does not decide
Which category your agreement falls into decides which cap applies, and the categories are defined in the Act rather than by what a lender calls the product. A loan you think of as short-term bridging may not be a short-term credit transaction as the Act defines it.
The repurchase rate also changes. Before relying on a figure here, check the current repo rate — and check that this page has been reviewed since the last regulation change.