47

8.—9.

Granting of Loans on Instalment System. 07. Practically the whole of the new loans are now being granted under an instalment system providing for the repayment of principal by half-yearly instalments together with the interest. This principle has long been applied in the case of loans on house properties and over buildings situated in the cities, but the extension of the system to rural properties is of recent adoption by the Public Trust Office. Generally speaking, the new system has been welcomed by those members of the farming community who are clients of the investment branch of the Office. Many of the farmers have come to realize that the short term loan is a most expensive one from the point of view of the borrower, involving as it does the recurrence at comparatively short intervals of the expense of a valuation and the legal expenses incidental to the renewal of the mortgages. Besides beingless expensive, the instalment system acts as a mode of compulsory saving on the part of the farmers, and many have expressed their appreciation of this special feature. The system is also a useful one from the point of view of the Public Trust Office, as it ensures that the margin of security will be constantly improved by the repayment of portions of the capital sum advanced, and it also makes additional moneys available for reinvestment from the proceeds of the repayments, and increases the flow of money available to borrowers. Wherever possible, renewals of existing mortgages are being carried out under this system over a period of fifteen, twenty, twenty-five, or thirty years, but in cases where good reason can be given by the mortgagor why a table mortgage is not acceptable the Board has endeavoured to meet the wishes of the mortgagor and grant the renewal on a flat mortgage. Under the short-term-mortgage system, the Office has a periodical opportunity of reviewing each security, as Government valuations are called for in practically all causes where the mortgage matures. In the case of instalment mortgages over long terms the same opportunity is not afforded. It has therefore been found necessary to insert in the mortgage-deed a covenant to the effect that inspections shall be carried out at periodical intervals at the cost of the mortgagor. Normally the period fixed for the first inspection is five years from tlie granting of the loan, and subsequent inspections are required at five-yearly intervals thereafter. Where special circumstances so require the mortgagor is required to covenant for more frequent inspections. Advances to Local Authorities. 68. The demand for funds on the security of broad acres has shown a slight tendency to decrease during the past year, and in consequence it has been possible to make more moneys available by way of advances to local authorities for works of public utility. The principal classes of local authorities to which loans have been granted comprise Borough Councils, County Councils, Electric-power Boards, Hospital Boards, Road Boards, and Town Boards. Much of the increase in the amounts advanced to Borough Councils and County Councils ha,s been due to the adoption of a progressive roading policy by those bodies. Numerous applications have recently been received from local bodies for special loans for the relief of unemployment. Emergency legislation giving the local bodies power to raise loans by resolution without obtaining the sanction of the ratepayers has been passed during the present session of Parliament for the purpose of meeting the position created by the existing unemployment. Applications for considerable amounts have been received, and the loans applied, for have been granted by the Public Trust Office Investment Board, subject, however, to the requirement that the local bodies shall obtain the consent of the Governor-General in Council under the provisions of section 20 of the Finance Act, 1919, authorizing the raising of the loan, and section 11 of the Finance Act, 1921, giving authority to pay interest at a rate exceeding 5| per cent. It is understood that the various enactments governing loans to local bodies will be consolidated during the present session of Parliament. The existing legislation in connection with local body loan matters is unsatisfactory in some respects, and as soon as the consolidation has been completed it would be advisable to have the whole of the legislation revised with the object of making it more effective.