Does Recalculating Mortgages Due to Repo Rate Changes Extinguish Arrears?

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Court Cases Pending Over Repo Rate Changes in Mortgage Calculations

There are soon going to be several interesting court cases which will deal with the possible extinguishing of mortgage arrears due to Repo Rate adjustments by banks. The idea is a new one here in South Africa and has not been argued before local courts before but it is an issue raised in other parts of the world.  In 2014 a case involving the Bank of Scotland it was ruled that when a bank recalculates what a consumer owes them based on a repo rate change, they are effectively consolidating a client’s arrears into the newly structured bond.  Similar arguments are now being presented locally, and it will be interesting to see how the local courts deal with this issue.

The legal teams handling the cases say that this is something that the bank’s systems may automatically be doing without the bank truly considering the legal ramifications of their recalculations.

If local banks are making changes to the accounts (due to a repo rate drop) that effectively cancel their right to collect on arrears, then thousands of consumers could now use this to protect their homes from repossession. Other people who have lost homes to repossessions due to not catching up on arrears may actually have a claim against the banks for ‘double dipping’ (taking legal action against them for arrears while also working those arrears into their mortgage payments) and selling off their property without just cause.