A pawnbroker had attempted to have a mortgage entered in the land register with an interest rate of 48% p.a. as security for a loan. The land registry refused the entry on the grounds that it was unethical. Schleswig Higher Regional Court confirmed the registry official’s view in a decision given on 5 September 2012 (ruling of 5 September 2012 – 2 W 19 / 12). The court found that there was a gross disparity between performance and consideration. Mortgage interest is normally registered at a rate which is considerably above the interest rate underlying the contractual transaction. The rate is generally around 15% during the current period of low interest rates. According to the court, registration of the 48% p.a. interest rate stipulated in the loan agreement exceeded this rate to such an extent that it was contra bonos mores.
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A mortgage with an annual interest rate of 48% p.a. is unethical
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