The Bank of England has raised interest rates to 5%. While bad news for many, it is good news for people with savings. It might also be good news for those pursuing claims for payment in Scottish courts, such as landlords.
The judicial rate of interest in Scotland is currently 8%. It has been at that rate since 1993.
It runs from the date the court action is served on the defending party until payment is made by them. Court actions can often last more than a year. For large claims, that can be a significant amount of money.
The idea behind judicial interest is to compensate the pursuer (claimant) for the loss it suffers from not having had the money it is claiming available to it to invest.
In 2011, the Court decided that the interest rate should be less in circumstances where the financial crash had caused interest rates to drop dramatically. When interest rates were 0.5%, it seemed ridiculous to still be awarding the pursuer 8% interest and so it awarded 4% instead.
Since then, as interest rates fell to as low as 0.25%, defenders have been resisting claims for interest at 8%.
With interest rates now at 5%, a compensatory rate of 8% doesn't seem that ridiculous anymore. And if the rate keeps rising, it's perfectly possible that a court would be willing to award more than 8% if asked – after all, between 1985 and 1993, the judicial rate was 15%.