Ban of Plenty Times FRIDAY, APRIL 27. 1923 THE MORATORIUM.

Bay of Plenty Times, Volume LI, Issue 8273, 27 April 1923, Page 2

Ban of Plenty Times FRIDAY, APRIL 27. 1923 THE MORATORIUM.

So much apprehension has been expressed of late in many quarters as to the likelihood of a serious financial crisis when the moratorium on land mortgagees expires at the end of 1924, that it is, perhaps, as well to look over the osition and see where we stand. In regard to the moratorium itself, suggestions have emanated from influential quarters lately hinting at a possible further extension, possibly on a graduated scale, based on'the original date of expiry of the mortgages. We cannot think that there is anything in the suggestions, because, as must be evident to every businessman, the country will not be able to settle down to its normal state of confidence as between lender and borrower until the moratorium is lifted. Mr Massey, possibly with a vie wto dispelling some of the uneasiness that undoubtedly exists on this point, has announced his intention of adding three million pounds to the existing capital of twenty millions at the disposal of the Advances to Settlers Board, so as to allmv farmers to borrow up to two thousand pounds for tiie purpose of paying off-rapjo a] •saSuSjJoui Sutjsixo however, to view the position of those protected by the moratorium, in a proper perspective it will be necessary to sec how the total of niortgag- <■?, stands, especially as compared with pre-war limes'. At the end of March, 1914, the total registered mortgages amounted to £106,442

297 as compared with £231,140,101 at the. end of March, 1922. During the period of eight years that elapsed between these dates( we had endured four years of war, which retarded the development of the country and was the cause of great loss of life, and a further ultimate loss of financial resources in the amounts expended on war services. It must be evident, therefore, that the immense increase in the amount of mortgages cannot be due to expenditure incurred in tbe process of industrial and agricultural development, such as might have taken place during a period of normal prosperity. Such being the case, we are justified in assuming that a large portion of the increase is due to sales of property at inflated values during the boom years that followed the war. A very large proportion of the mortgages extant twelve months ago were doubtless, third and fourth mortgages, representing supposed profits made by speculators in the course of their operations. These mortgages are now in lire course of being automatically wiped off the register through, firstly, the agency of mortgagees sales; secondly, by accommodation between the mortgagees and the nominal owner, and in some cas:s by

reason nf lesser mortgagees declining to take responsibility. In addition to the above sources of elimination, it has to be remembered that only those mortgages which were extant in October, 1919, are protected by the moratorium, and no doubt large numbers of the mortgagors have already made arrangements for extensions or renewals, and to that extent have protectee! themselves. This can only have been done in those cases where the security has been of good value. Of the total mortgages, the sum of £161,000,000 represents the amount registered on rural lands, and as the inflation period was marked, not only by a lack of farm improvement, but even of neglect, it follows that a return to normal times will bring about a lowering of values for such lands, beyond what would have been had speculation not been so rife-. It is obvious, then, that those, mortgages which are the result of inflated values, and which, mostly represent fictitious profits, must be regarded as of no value, and hard as it may be for the individual, the sooner they are wiped olf the slate the quicker will we arrive at a period of stabilised values. We have seen it stated by one. financial authority that as muchas forty million pounds over and above the amount that is likely to be available will be required at the expiry of the. moratorium, to enable mortgagors to meet their obligations, a sum equalling about seventeen per cent, of the mortgages extant. We doubt if this is a true measure of the inflation that has taken place. For the reasons given above we are of the opinion that needless alarm has been felt as to the possible crisis that will be the result of the lifting of the moratorium. In any case it would be sheer madness were the Government to set about lending on a large scale to enable the mortgagor to pay off his creditor, or to save the latter from the loss caused by the deflation of the value of his security.