INTEREST RATE

Hokitika Guardian, 2 April 1932, Page 5

INTEREST RATE

AN AUSTRALIAN EASING, MONEY AVAILABLE FOR INVESTMENT. (Australian Press Association ) SYDNEY, April 1. Although the reduction of 22$ per cent in rates of interest under the Premiers’ plan does not apply to loans made since October, there has been no tendency to charge interest at the rates ruling before the compulsory reduction, says an Australian paper_ The large lenders of money, trustee companies, insurance companies, pastoral companies, and banks have observed the spirit as well as the letter of the plan, and rates of interest on first-class security have been generally lower in the last six months. The current rate on mortgages is now 6 per cent., at which old mortgages have 'been renewed and a few new mortgages have been granted. Rates of interest for advances against produce, etc., are about 6$ per cent., and the general rate for bank advances is 6 per cent. There is plenty of money available | for investment, but in few cases i s the security offered sufficiently attractive to secure the advance required. Surplus funds have forced rates of interest downward and have led to the recent reduction of rates of interest quoted for bank deposits. Legislation would have been powerless to bring about n permanent reduction of rates of interest ; if conditions were not favourable to lower rates of interest, new loans coulcl not be obtained at the rates now quoted, which are in accord with the statutory reduction.

The Financial Emergency Act of Victoria and similar Acts in other states have been mainly effective in reducing rates of interest on long-term contracts, but rates on new loans would probably have fallen gradually to somewhere about present levels without the arbitrary reduction.

The low rates of interest now quoteci are largely ineffective as there are very few hoi rowers in a position to taKe advantage of them. Values are so difficult to define at present that lenders have to be very cautious, and this "caution is preventing the lending of funds because few borrowers are able to offer the margin of security demanded.