INTEREST RATES.

Auckland Star, Volume LXVI, Issue 39, 15 February 1935, Page 9

INTEREST RATES.

MR. COATES , HOPES. NO STATE GUARANTEE. COST OF MANAGEMENT. {By Telegraph.—Parliamentary Reporter.) WELLINGTON, this day. Interest rates payable by mortgagors of the Mortgage Corporation and the liability of that institution for payment of local body rates were the subject of further explanation by Mr. Coates in the House to-day.

Tlie Minister eaid the introduction of private shareholder capital was a, method of giving investors a security stronger and more attractive than any other method. It had been suggested that there should be a State guarantee, but it was not possible for New Zealand, if it wished to preserve the value of its existing and future securities, to give a general blank guarantee. By the Crown providing half the capital and putting in reserves he believed, after the closest discission with investors in Zealand, that it would be possible to borrow money at the gilt-edged rate and give the borrowers finance at the cheapest rate it was possible to get. If the corporation raised funds 'at 3 per cent, the rate of interest to rowers would! be £4, 12/9 oVer 60 years, after allowing ,1. per cent, for management and making provision far a sinking fund; It was anticipated, however, that it would be possible to reduce the -cost of management to f per cent, as soon the institution was under way,; and in that case the interest rate to borrowers would be £4 8/. If' the interest on bonds issued by the corporation were 3J per cent, and tee cost of management were j per cent., the rate of interest oh mortgages would be just over 4i per cent. Local Body Rates. Discussing the question of local body rates, the Minister made it clear that the corporation would be liable for rates on new mortgages, but in relation to, existing State Department mortgages taken over, the position would remain the same, and the corporation would not be liable for rates on them. Under the rehabilitation proposals to be submitted to the House next week, rates would be placed in the first category of liabilities to fall upon the receipts of the farmer—that was, rates would .rank alongside Merest in the foreground of liabilities to be met. '