LOCAL BODY LOANS

Ashburton Guardian, Volume 56, Issue 276, 3 September 1936, Page 7

LOCAL BODY LOANS

IMPASSE IN MARKET FORECAST

SEEKING OTHER INVESTMENTS.

fPer Press Association.) AUCKLAND, Sept. 2

An impasse in the local body loans market is being approached, as lending institutions arc disinclined to take up Joans at 31 per cent., which is the maximum rate of interest allowed by the Local Government Loans Board. Practically all the lending firms, principally life insurance offices, are rejecting loans at that rate of interest, as they do not want to tie up money for any number of years while interest rates may harden. They prefer to look for other investments, or to buy temporarily Government securities, which are showing a higher return.

There is a further reason, in one case at least —that of the Auckland Savings Bank. Since 1933, savings banks have been forced to pay income tax. Last year the Auckland Savings Bank paid £16,000 in income tax, and the recent increase in the rate will bring its annual payment to about £20,000. For this reason, the bank has withdrawn an offer to lend £25,000 at 31 per cent, for the Thanras Valley Power Booard. Previously there, had been correspondence between the two parties about the term of the loan, the bank being averse to a long-dated loan.

Recently the bank took up a loan of £377,000 for 24 years at 3}- per cent, from the Auckland City Council. However, in this instance an arrangement to repay principal and interest half-yearly was reached. The hank is thus getting the principal hack during the currency of the loan, and can reinvest it if more profitable outlets arc shown.