When the Government Employees Retirement System resumes lending to its members on Oct. 4 after a scheduled hiatus of three and a half months, borrowers will face new interest rates — higher for personal, retiree and automobile loans, but lower for mortgage and land loans.
And from now on, according to a GERS press release, "the system will review loan interest rates monthly, and changes will be made as are appropriate to reflect the average margins" of the lending market locally.
There have been calls for increasing revenues coming into the system, which currently is paying out more in benefits to retirees than it is taking in through employee and employer payroll contributions.
However, the reason stated for the moratorium on loans was not related to the fiscal concerns. GERS announced last spring that it would impose a moratorium on lending between June 17 and Oct. 4 so the system could be upgraded to Y2K readiness.
"The conversion is just about finished," GERS staff member Patricia Williams told The Source Thursday, adding that the system should be Y2K compliant by the time loans are resumed.
The home mortgage rate has been the same since 1985, and the personal loans rate hasn't changed since 1988, the release stated. It said the changes reflect interest rates research, the recommendations of the GERS actuary and independent auditor, and the findings of the most recent GERS audit by the Office of the U.S. Inspector General.
The new and previous rates, respectively, are as follows:
Personal and retiree loans, 9.5 percent, up from 8 percent.
Automobile loans, 11 percent, up from 9 percent.
Land loans, 8.25 percent, down from 10 percent.
Mortgage loans, 8.25 percent, down from 10 percent.
Second-mortgage loans, 9.25 percent, down from 11 percent.
Application fees are remaining at $50 for mortgage loans, increasing to $25 from $5 for personal and retiree loans, and increasing to $25 from $10 for auto loans.