NO CHEAP MONEY YET

Sun (Auckland), Volume III, Issue 662, 14 May 1929, Page 14

NO CHEAP MONEY YET

AUSTRALIAN INFLUENCE DIFFICULT FOR FARMERS j (From Our Resident Reporter) WELLINGTON, Today. A drop of more than one-half per cent, in the mortgage rate is unlikely, in the opinion of several of "Wellington’s biggest financiers. “The New Zealand money market, is largely influenced by the conditions in Australia,” said one financier today. “And it is impossible to overlook the fact that in Australia, at present, the mortgage rate is one-half per cent, higher than in New Zealand. Any reduction in the interest rates here would mean that even more money than at present would seek investment in the Commonwealth. “Illustrative of the position it may bo mentioned that one of the biggest insurance companies operating in Australia and New Zealand, the offices pf which are closely allied, subscribed £1,000,000 toward the recent Commonwealth loan, at 51 per cent., at par. This company has financed some local bodies in New Zealand, but it appears not to be anxious to do any more of that sort of business purely because of the better field in Australia. Another large company has not been investing in this country for some time. “There is, it is true, a good deal of money about and there is the feeling that rates should be lower. But public confidence in broad acre securities has apparently not yet been restored. Financial agents imagined that after a couple of good seasons people would be willing to lend money once more on farm securities. That has proved not to be the case. Recently I had an application for a mortgage, a second mortgage, certainly, on a property which had edrned a good profit for years past. This application met with fourteen refusals from likely lenders who were clients of mine. Money which is coming out of farm securities, save in the case of farm trust companies, does not appear to be being placed back in farm securities. It finds another source of investment around the cities. And the result for the farmers is very serious. They are not getting necessary improvements done “A great deal, of course, depends upon the banks. At present they seem unwilling to reduce interest rates, largely, no doubt, from fear of the effect of the Australian money market upon the Dominion. But if the bank rates are reduced, building societies, savings banks and general investors will have to be content with a smaller return.”