Effective January 1, 2025, the Criminal Interest Rate has been lowered
The criminal interest rate in Canada has officially been lowered from 60% to 35%, effective January 1, 2025. This significant change impacts mortgage brokerages, private lenders, and loan arrangements, making it crucial for industry professionals to understand their obligations under the new legislation.
Key compliance considerations for Mortgage Brokerages
If your brokerage arranges mortgages directly on behalf of private lenders, you must ensure that these lenders are aware of the new regulation. It is now a criminal offence to offer loans at an interest rate higher than 35%, subject to specific exceptions. For brokerages arranging loans where the lender is represented by another brokerage or is a direct lender, your primary responsibility is to the borrower. You must ensure that the interest rate—including fees and other costs—does not exceed 35%.
APR and the true cost of borrowing
Interest, as defined under the law, includes not only the stated rate but also various fees and additional borrowing costs. In cases where loans are small and short-term, these extra costs could push the Annual Percentage Rate (APR) above the 35% threshold. Mortgage professionals must carefully calculate the full cost of borrowing to ensure compliance.
Exceptions for certain commercial loans
Some commercial loans are exempt from this legislation. If your brokerage arranges commercial financing, it is critical to understand the legal definitions and applicable exemptions. There are many resources available online—including legal articles—that provide further guidance on these changes.
Ensuring compliance with the Real Estate Act Rules
The Real Estate Act Rules require all mortgage licensees to practice in full compliance with the Act, Regulations, Rules, and Bylaws governing mortgage transactions in Alberta. As a brokerage, it is your responsibility to stay informed and ensure adherence to the new criminal interest rate regulations.
For more details, consult legal and industry resources to better understand the impact of these legislative updates.
