What Is Shortfall Interest Charge?
A shortfall interest charge is interest due after a borrower has made their monthly payment. On certain adjustable-rate loan, negative amortization may occur. The financial term for a rise in the principal of a debt due to failure to pay interest is called negative amortization.
KEY TAKEAWAYS
- When interest on a debt payment is not covered, a shortfall occurs.
- An interest rate cap may limit monthly payments on a variable-rate mortgage to less than total interest due.
How Interest Shortfalls Work
This is known as negative amortization. Negative amortization is the term used to describe this.
The negative amortization protects borrowers from the shock of an abrupt rise in ARM interest rates. It may take longer to amortize the loan, and equity in your home will drop if rates increase. Even if the value of the home increases, the interest rate will still increase.
Interest shortfalls on MBS
When there is an interest shortfall, the market for mortgage-backed securities will usually delay interest payments. The subordinate class will usually be the first to pay, with senior tranches being repaid.
Shortfall interest charge (SIC) rates
Learn when the shortfall Interest Charge (SIC) is applicable for changes in income tax assessments as well as current SIC rates.
When SIC applies?
A shortfall charge of a reduced interest rate was introduced for income tax assessments made in 2004-05 and later years on 29 June 2005. This charge is a reduction of the general charge of interest that was charged to income tax deficits prior to the amendment of the assessment.
The SIC and amended assessment (or tax shortfall) are due 24 days after the date on which the amended assessment is issued.
GIC continues to apply for any tax shortfalls found in amended assessments from 2003-04 and earlier income years. GIC is applied as of the original assessment due date.
If not paid by the due date, GIC applies to original assessments and tax shortfalls.
This link will allow you to download the following file:ROSA in brief – shortfall interest charge (NAT 4920, PDF 221KB)This link will download a file
Calculation of Shortfall Interest Charge (SIC)
The SIC is calculated every day.
The SIC rates change quarterly. The rates for the next quarter are usually announced about two weeks prior to the beginning of the quarter.
Quarterly Shortfall interest charge (SIC) rates
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2024 | 7.34% | 0.02005464% |
| January – March 2024 | 7.38% | 0.02016393% |
| October – December 2023 | 7.15% | 0.01958904% |
| July – September 2023 | 6.90% | 0.01890411% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2023 | 6.46% | 0.01769863% |
| January – March 2023 | 6.06% | 0.01660274% |
| October – December 2022 | 5.31% | 0.01454794% |
| July – September 2022 | 4.00% | 0.01095890% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2022 | 3.07% | 0.00841096% |
| January – March 2022 | 3.04% | 0.00832877% |
| October – December 2021 | 3.01% | 0.00824657% |
| July – September 2021 | 3.04% | 0.00832877% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2021 | 3.01% | 0.00824657% |
| January – March 2021 | 3.02% | 0.00827397% |
| October – December 2020 | 3.10% | 0.00846994% |
| July – September 2020 | 3.10% | 0.00846994% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2020 | 3.89% | 0.01062841% |
| January – March 2020 | 3.91% | 0.01068306% |
| October – December 2019 | 3.98% | 0.01090411% |
| July – September 2019 | 4.54% | 0.01243836% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2019 | 4.96% | 0.01358904% |
| January – March 2019 | 4.94% | 0.01353425% |
| October – December 2018 | 4.96% | 0.01358904% |
| July – September 2018 | 4.96% | 0.01358904% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2018 | 4.77% | 0.01306849% |
| January – March 2018 | 4.72% | 0.01293151% |
| October – December 2017 | 4.70% | 0.01287671% |
| July – September 2017 | 4.73% | 0.01295890% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2017 | 4.78% | 0.01309589% |
| January – March 2017 | 4.76% | 0.01304109% |
| October – December 2016 | 4.76% | 0.01300546% |
| July – September 2016 | 5.01% | 0.01368852% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2016 | 5.28% | 0.01442623% |
| January – March 2016 | 5.22% | 0.01426229% |
| October – December 2015 | 5.14% | 0.01408219% |
| July – September 2015 | 5.15% | 0.01410959% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2015 | 5.36% | 0.01468493% |
| January – March 2015 | 5.75% | 0.01575342% |
| October – December 2014 | 5.63% | 0.01542466% |
| July – September 2014 | 5.69% | 0.01558904% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2014 | 5.63% | 0.01542466% |
| January – March 2014 | 5.59% | 0.01531507% |
| October – December 2013 | 5.60% | 0.01534246% |
| July – September 2013 | 5.82% | 0.01594520% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2013 | 5.95% | 0.01630137% |
| January – March 2013 | 6.24% | 0.01709589% |
| October – December 2012 | 6.62% | 0.01808743% |
| July – September 2012 | 6.66% | 0.01819672% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2012 | 7.37% | 0.02013661% |
| January – March 2012 | 7.62% | 0.02081967% |
| October – December 2011 | 7.86% | 0.02153425% |
| July – September 2011 | 8.00% | 0.02191781% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2011 | 7.92% | 0.02169863% |
| January – March 2011 | 8.02% | 0.02197260% |
| October – December 2010 | 7.74% | 0.02120548% |
| July – September 2010 | 7.80% | 0.02136986% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2010 | 7.16% | 0.01961644% |
| January – March 2010 | 6.95% | 0.01904110% |
| October – December 2009 | 6.30% | 0.01726027% |
| July – September 2009 | 6.13% | 0.01679452% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2009 | 6.16% | 0.01687671% |
| January – March 2009 | 7.76% | 0.02126027% |
| October – December 2008 | 10.31% | 0.02816939% |
| July – September 2008 | 10.75% | 0.02937158% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2008 | 10.69% | 0.02920765% |
| January – March 2008 | 10.15% | 0.02773224% |
| October – December 2007 | 9.75% | 0.02671233% |
| July – September 2007 | 9.37% | 0.02567123% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2007 | 9.37% | 0.02567123% |
| January – March 2007 | 9.37% | 0.02567123% |
| October – December 2006 | 9.19% | 0.02517808% |
| July – September 2006 | 8.87% | 0.02430137% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2006 | 8.61% | 0.02358904% |
| January – March 2006 | 8.63% | 0.02364383% |
| October – December 2005 | 8.62% | 0.02364383% |
| July – September 2005 | 8.68% | 0.02378082% |
| Quarter | SIC annual rate | SIC daily rate |
|---|---|---|
| April – June 2005 | 8.63% | 0.02364383% |
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