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The Tennessee Conservative [By David Seal] –
Lending institutions will be using a new formula to determine interest on home loans in the state of Tennessee as of July 1, 2025. Sponsoring legislators billed the proposed legislation as a means of opening the market to borrowers that wish to take out secondary loans with a payback period greater than 15 years.
The text of the bill is more general to home loans, stating in part, “the maximum effective rate of interest per annum for home loans shall be set at an amount equal to four (4) percentage points above the average prime offer rate, as defined in 12 CFR 1026.35, that applies to a thirty-year fixed loan, as published by the federal financial institutions examination council, or its successor federal entity.”
House Bill 908 / Senate Bill 749 sponsored by Representative Johnny Garrett (R-Goodlettsville) and Senator Ken Yager (R-Kingston) respectively, also places a cap of 18% as a maximum annual interest rate that can be charged for home loans.
The Bill Summary explains the current law concerning home loans. “Present law provides that the maximum effective rate of interest per annum for home loans is set at an amount equal to two percentage points above the most recent weighted average yield of the accepted offers of the Federal National Mortgage Association’s current free market system auction for commitments to purchase conventional home mortgages (FNMA Auction). In the event the Federal National Mortgage Association discontinues the conduct of the auction, the maximum effective rate of interest per annum for home loans must be set at an amount equal to four percentage points above the index of market yields of long-term government bonds adjusted to a 30-year maturity by the department of the treasury.”
Public Chapter 290, signed into law on April 28, 2025, by Governor Lee dispenses with the old rules and replaces them with a cap of 4% APR above the prime interest rate on thirty-year fixed rate loans.
The house bill passed on a vote of 90-0. The senate voted to substitute and conform to the house bill 24-5 with one present and not voting.
A video clip of the Senate vote, including debate, is linked here.
About the Author: David Seal is a retired Jefferson County educator, recognized artist, local businessman, 917 Society Volunteer, and past Chairman of the Jefferson County Republican Party. He has also served Jefferson County as a County Commissioner and is a citizen lobbyist for the people on issues such as eminent domain, property rights, education, and broadband accessibility on the state level. David is also a 2024 winner of The Tennessee Conservative Flame Award & has received an accolade from the Institute For Justice for successfully lobbing the TN legislature to protect property rights. David can be reached at david@tennesseeconservativenews.com.
