INTEREST RATE

Hokitika Guardian, 6 April 1932, Page 2

INTEREST RATE

MERCANTILE FIRMS

GOVERNMENT ACTION AWAITED

CHRISTCHURCH, April 5

Most mercantile linns are waiting to see what steps the Government wi-1 take before they make any move to reduce the interest payable by their mortgagors or to their bondholders. The New Zealand Farmers’ Co-opera-tive Association has already made a reduction,' hut other firms feel disinclined to make a voluntary reduction now when in a feu 1 '" months a fnrher statutory’reduction may lie forced on them. ’

The firms opeTliiting in Christchurch fall* roughly into two divisions. Firms of the type of the Farmers’ Co-opera-tive Association have their capital of held in bonds, while the capital of others is held as shares in the ordinary way. It is obvious that a firm whose capital is held in shares will have reduced its payments to shareholders as profits from its activities have fallen off. With bond-holding firms, it is possible, with the consent of the bonholders, to reduce the interest payable on the money lent out by the firms. With all firms a great deal depends on the attitude of the banks. In the event of no compulsory reduction being ordered by the legislature, the hanks may decide on n reduction ill their interest charges to mortgagors,

At present "firing whose capital is held in bor.ds : are waiting till the Government has dealt with interest charges." If no compulsory reduction is insisted on, bondholders may be asked to accept reduced payments; this would bring relief to the farmer. Tn some cases, profits from firms’ activities have been so ! reduced as to force a reduction in payments to bondholders.

Among lenders there seems to he a general desire for a reduction, or if not a desire, a willingness to accept a lower rate than the present standard rate on really good securities. Two principal causes contribute to the present lack of activity in rural securities. Both buyers and lenders have lost a good deal of their confidence in land as an investment. It is enouraging that in the'-new business being done by firms in this direction, money may be secured at reduced rates on good securities.

As the position stands to-day, there will he little definite movement Towards a reduction in interest rates till the subject- has been brought before the House and discussed j and the intentions of Parliamen are known.