LOANS “UNLIKELY TO INCREASE MUCH”

Press, Volume C, Issue 29510, 11 May 1961, Page 7

LOANS “UNLIKELY TO INCREASE MUCH”

(New Zealand Press Association)

WELLINGTON, May 10. Although the new rates tor local body borrowing provided an increase of 1-8 per cent, on loans of five and six-year terms and also on all loans of more than 10 years, it was unlikely that this would appreciably increase the moneys which would be made available to local bodies by way of loans, said the secretary of the Municipal Association (Mr C. L Bishop). Mr Bishop was asked to comment on the new terms, announced by the Minister of Finance (Mr Lake). Mr Bishop said it would appear that the position would require to be reviewed again in the near future “with a view to restoring the margin which previously existed.” He said that until last year it had been the practice for very many years for interest rates for local body loans to be % per cent, higher than those offered for Government loans. This margin, however, was reduced last year to 1-8 per cent. The reduction in the margin made it more difficult

for local authorities to raise ■ loan moneys from some, of ■ the financial institutions, and ■ this applied in particular for I long-term loans. Helping Themselves Mr Bishop said that for ■ the last four years the local ' authorities had been doing a 1 great deal to help themselves 1 in the provision of loan ■ moneys by the operation of ■ a local authority pool ■ through the National Provident Fund. 1 This pool consisted of the ; reserve fund, sinking fund, and depreciation fund moneys together with surplus loan I money not at present rei quired and other surplus I moneys held by local : authorities. : The pool had been built up ■ to an amount of something in the vicinity of £25 000.000 ■ and this had enabled sub- • stantial loan moneys to be ■ provided from the pool. i Interest rates did not have ■ any effect on the lending • from this pool, but loan , moneys from the other big : financial institutions were not being attracted now that the ■ margin in interest rates had . been removed.