Announcement of Maximum Effective Formula Rate of Interest
December 12, 2023
NASHVILLE--Tennessee Department of Financial Institutions Commissioner Greg Gonzales announced today that the maximum effective formula rate of interest in Tennessee is 12.50 percent per annum.
The rate is based on a ceiling of 4 percent over the weekly average prime loan rate of 8.50percent as published by the Federal Reserve onDecember 11, 2023.
Commissioner Gonzales said the rate remains in effect until the average prime loan rate as announced by the Federal Reserve Bank changes.
Chapter 464, Public Acts of 1983, the legislation regulating interest rates in Tennessee, requires that the commissioner of Financial Institutions make an announcement weekly of the formula rate of interest.
Announcement of Maximum Effective Rate of Interest on Home Loans
The Federal National Mortgage Association has discontinued its free market auction system for commitments to purchase conventional home mortgages. Therefore, the Commissioner of Financial Institutions hereby announces that the maximum effective rate of interest per annum for home loans as set by the General Assembly in 1987, Public Chapter 291, for the month ofJanuary, 2024is8.49 percent per annum.
The rate as set by the said law is an amount equal to four percentage points above the index of market yields of long-term government bonds adjusted to a thirty (30) year maturity by the U. S. Department of the Treasury. For the most recent weekly average statistical data available preceding the date of this announcement, thecalculated rateis4.49 percent.
Persons affected by the maximum effective rate of interest for home loans as set forth in this notice should consult legal counsel as to the effect of the Depository Institutions Deregulation and Monetary Control Act of 1980 (P.L. 96-221 as amended by P.L. 96-399) and regulations pursuant to that Act promulgated by the Federal Home Loan Bank Board. State usury laws as they relate to certain loans made after March 31, 1980, may be preempted by this Act.
Greetings! I'm well-versed in financial regulations and legislative frameworks, so allow me to delve into the intricacies of the announcement you shared.
Firstly, Commissioner Greg Gonzales is adhering to Chapter 464, Public Acts of 1983, which mandates a weekly proclamation of the formula rate of interest in Tennessee. The declared maximum effective formula rate of interest is 12.50 percent per annum. This rate is derived from a ceiling of 4 percent over the weekly average prime loan rate of 8.50 percent, as published by the Federal Reserve on December 11, 2023. Commissioner Gonzales emphasizes that this rate will persist until the Federal Reserve alters the average prime loan rate.
Now, shifting to home loans, the Commissioner discloses that the maximum effective rate of interest per annum for these loans, set by the General Assembly in 1987 under Public Chapter 291, for January 2024 is 8.49 percent. The formula for determining this rate involves adding four percentage points to the index of market yields of long-term government bonds adjusted to a thirty-year maturity by the U.S. Department of the Treasury. The calculated rate based on the most recent weekly average statistical data before the announcement is 4.49 percent.
However, there's a crucial advisory for individuals affected by this rate concerning the Depository Institutions Deregulation and Monetary Control Act of 1980 (P.L. 96-221 as amended by P.L. 96-399). The Commissioner recommends consulting legal counsel to understand the implications of this Act and its regulations, particularly those from the Federal Home Loan Bank Board. Furthermore, state usury laws relating to loans made after March 31, 1980, may be subject to preemption by this Act.
To sum it up, the financial landscape in Tennessee, especially concerning interest rates and home loans, is intricately regulated and closely tied to both federal and state legislative frameworks. Understanding these nuances is crucial for anyone navigating the financial terrain in the state.
FAQs
Right now, the Fed interest rate is 5.25% to 5.50%. The FOMC established that rate in late July 2023. At its most recent meeting in March, the committee decided to leave the rate unchanged.
What are interest rates today? ›
Current mortgage and refinance rates
| Product | Interest Rate | APR |
|---|
| 20-year fixed-rate | 7.043% | 7.148% |
| 15-year fixed-rate | 6.381% | 6.518% |
| 10-year fixed-rate | 6.178% | 6.376% |
| 7-year ARM | 7.515% | 7.985% |
5 more rowsRight now, the Fed interest rate is 5.25% to 5.50%. The FOMC established that rate in late July 2023. At its most recent meeting in March, the committee decided to leave the rate unchanged.
Are interest rates going down in 2024? ›
Given persistent inflation, among other macroeconomic factors, many experts predict that mortgage rates will remain at similar levels well into 2024.
What are interest rates rates? ›
The interest rate is the amount a lender charges a borrower and is a percentage of the principal—the amount loaned. The interest rate on a loan is typically noted on an annual basis and expressed as an annual percentage rate (APR). 1. An interest rate can also apply to a savings account or certificate of deposit (CD).
Will mortgage rates ever be 3 again? ›
It's possible that rates will one day go back down to 3%, though if current trends hold that's not likely to happen anytime soon.
How high will interest rates go? ›
Here's what the nation's big four banks have to say: ANZ predicts that the current level of 4.35% will be the cash rate's peak, with the first cuts to start around November 2024, and rates dropping to a level of around 3.60% by mid 2025.
What is prime interest rate? ›
The prime rate, as reported by The Wall Street Journal's bank survey, is among the most widely used benchmark in setting home equity lines of credit and credit card rates. It is in turn based on the federal funds rate, which is set by the Federal Reserve.
Why are interest rates so high? ›
When the Prime Rate is high, borrowing money is more expensive. This causes increased interest rates and lower spending. This also effectively lowers inflation. This is why the Federal Reserve raised interest rates in 2022, to fight rising inflation.
What is the interest rate outlook for 2024? ›
While McBride had expected mortgage rates to fall to 5.75 percent by late 2024, the new economic reality means they're likely to hover in the range of 6.25 percent to 6.4 percent by the end of the year, he says.
What happens to house prices in a recession? While the cost of financing a home increases when interest rates are on the rise, home prices themselves may actually decline. “Usually, during a recession or periods of higher interest rates, demand slows and values of homes come down,” says Miller.
Can I negotiate my mortgage rate? ›
Yes, to some degree, mortgage interest rates are negotiable. Mortgage lenders have some flexibility when it comes to the rates they offer. However, in many cases getting a lower rate on your loan will come with a price, such as paying “points” to get a lower rate.
Where will interest rates be in 2025? ›
The average 30-year fixed mortgage rate as of Thursday was 6.99%. By the final quarter of 2025, Fannie Mae expects that to slide to 6.0%. Meanwhile, Wells Fargo's model expects 5.8%, and the Mortgage Bankers Association estimates 5.5%.
Is it good if interest rates are high? ›
If interest rates rise, that means individuals will see a higher return on their savings. This removes the need for individuals to take on added risk by investing in stocks, resulting in less demand for stocks.
How do you calculate 9.5 interest rate? ›
Detailed Solution
- Given: Rate of interest = 9.5% Amount after 6 years = Rs 942.
- Concept used: Simple Interest, SI = PNR/100. Where P = principal, R = rate of interest and N = time. Amount = SI + P.
- Calculation: SI = Amount - P. ⇒ (942 – P) = (P × 9.5 × 6) /100. ⇒ 94200 – 100P = 57P. ...
- ∴ The amount invested initially is Rs 600.
Best High-Yield Savings Account Rates
- Evergreen Bank Group – 5.25% APY.
- CFG Bank – 5.25% APY.
- Upgrade – 5.21% APY.
- EverBank (formerly TIAA Bank) – 5.15% APY.
- RBMAX – 5.15% APY.
- Bread Savings – 5.15% APY.
- Popular Direct – 5.15% APY.
- Western State Bank – 5.15% APY.
Interest rates have held steady since July 2023.
The Fed raised the rate 11 times between March 2022 and July 2023 to combat ongoing inflation. After its December 2023 meeting, the Federal Open Market Committee (FOMC) predicted making three quarter-point cuts by the end of 2024 to lower the federal funds rate to 4.6%.
Are mortgage rates expected to drop? ›
Mortgage rates are expected to decline later this year as the U.S. economy weakens, inflation slows and the Federal Reserve cuts interest rates. The 30-year fixed mortgage rate is expected to fall to the mid- to low-6% range through the end of 2024, potentially dipping into high-5% territory by early 2025.
Is 2.75 a good mortgage rate? ›
Buying a home at a low 2.75% rate is fantastic by today's standards. But when you experience buyer's regret and want to sell, you have to deal with current mortgage rates, which are closer to 7%. You might feel stuck if you can't afford to cough up the cash for an outright purchase.
Should I lock mortgage rate today? ›
The ideal time to lock your mortgage rate is when interest rates are at their lowest, but this is hard to predict — even for the experts. It's worth noting that interest rates could decrease during your lock period. Should this happen, you'll most likely have to pay the rate you initially locked in.
