Building Loans (Jersey) Law 1950: New Method of Interest Calculation

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A decision made 26 February 2018:

Decision Reference: MD-H-2018-0006
Decision Summary Title:	Building Loans (Jersey) Law 1950 amended – introduction of new interest calculation methodology		Date of Decision Summary:	20th February 2018
Decision Summary Author:	Fund Accountant, Treasury and Investment Management		Decision Summary: Public or Exempt?	Public
Type of Report:	Written		Person Giving Oral Report:	n/a
Written Report Title:	Building Loans (Jersey) Law 1950 amended – introduction of new interest calculation methodology		Date of Written Report:	20th February 2018
Written Report Author:	Fund Accountant, Treasury and Investment Management		Written Report: Public or Exempt?	Public
Subject: Building Loans (Jersey) Law 1950 amended – introduction of new interest calculation methodology
Decision(s): The Minister approved a new interest calculation methodology for loans under the Building Loans (Jersey) Law 1950 amended.
Reason(s) for Decision: The Building Loans (Amendment No. 13) (Jersey) Law 2018 was registered by the Royal Court on 16th February 2018. The amendment has closed the inconsistency between the principle law and regulations by giving the Minister for Housing power to amend the interest payment methodology for loans. Previously the Law required a rigid method of calculating interest payments on the loans based on the balance of the loan on the 1st January each year. This was inconsistent with modern practice where the method of calculating interest on the loans is to apply a reducing balance based on the rolling monthly capital value of a loan over its lifetime.
Resource Implications: There will a small reduction in the level of interest income generated as a result of different calculation based on reduced balance of the loan instead of balance at the beginning of each year. This will not have a material effect on the loan fund.
Action required: Fund Accountant, Treasury and Investment Management, to action changes required as a result of change in interest calculation method, and to communicate the changes to loan holders.
Signature:		Position: Deputy Anne Pryke Minister for Housing
Date Signed:		Date of Decision (If different from Date Signed):