Yet another group of angry borrowers hoping for relief from soaring interest rates on home loans has challenged the banks in court.
In the latest action, 63 borrowers took on Absa in the Cape Town High Court this week in a bid to persuade judges to declare interest rate increases on home loans invalid. Absa has been summonsed to put forward its own arguments.
At the crux of the matter is the validity of a clause, included in most home loan contracts, which allows banks to adjust interest rates from time to time.
The Cape Town action follows two High Court cases in Gauteng over the last year in which judges found that the home loan contracts contravened two principles of law: that contractual obligations must be defined and ascertainable and that contracts cannot be unilaterally changed by one party.
One of these cases, against NBS, is now on appeal.
Meanwhile in a third case against Absa in KwaZulu/Natal, the judge said banks were entitled to vary interest rates because both parties had agreed to it in the mortgage bond. This case is also on appeal.
In another case, which is scheduled to be heard in the Cape High Court on October 28, a Cape businesswoman is opposing a claim against her of more than R290 000 by Standard Bank. The bank says that she failed to pay her monthly instalments.
She is opposing the application and intends bringing a counter claim for damages. She says that she is contractually bound to pay instalments at a rate of 14,75 percent only. Standard Bank's usual home loan rate is now 24 percent.
Bob Tucker, chairman of the Banking Council which represents the banks, has said if the borrowers win their case and succeed in getting the banks to reimburse the excess interest paid, the banks may call in their loans.
Borrowers would then have to renegotiate their loans and the new contract would make allowance for interest rate increases, he said.
No date has yet been set for the next stage of the Absa hearing.
Pending decisions by the courts, the Banking Council has advised you to keep meeting monthly home loan payments.
Failure to do so, the council has warned, would mean you are in breach of your contract and the banks could ask you to pay the full outstanding amount of your loan.