Shortage Of Loan Money For City Housing

Press, Volume C, Issue 29557, 5 July 1961, Page 14

Shortage Of Loan Money For City Housing

Shortage of loan money in Christchurch has caused several insurance companies to alter their policies on lending money on houses. One company has suspended all loans for about two months, and another company has reduced the maximum amount it will lend from 70 to 60 per cent. Most insurance companies have increased the interest rate from 5} per cent, to 6 per cent. Loans granted are not on the basis of a percentage of the cost price but on the company’s valuation. Also, most companies will grant loans on older houses only if they are in good repair and in a good locality. Managers of insurance companies interviewed yesterday

considered that there was little hope of more loan money becoming available soon or of interest rates being decreased. Bank restrictions and Government loans, they said, had placed a burden on the loan market, so that most companies had to restrict private loans. Companies were still lending money on houses, but to keep up with commitments on these loans for farming and commerce had been reduced Government Loan It is understood that the Government has made it clear that it expects insurance companies to invest heavily in the present Government development loan. From some companies the amount expected is about twice the normal amount invested. This could aggravate the shortage of money for houses. Although some insurance companies have reduced the terms of housing loans this has not meant a general reduction in the amount of money lent. In most cases the companies are lending more than in previous years, but such is the demand that temporary restrictions have been brought in. The Canterbury manager of the Colonial Mutual Life Assurance Society (Mr R. J. Williams' said that because of the heavy demand for loan money the company had reduced the amount it would lend on houses from 70 to 60 per cent., and had suspended farming and commercial loans. Mr Williams said that one of the main requests for loans came from persons who wanted to buy sections. After a payment of 15 per cent, deposit the insurance company would buy the section and the State Advances Corporation would then provide money for a house to be built. Lending Suspended Mr J. B. Roberts, manager of the National Mutual Life Association, said that the company had suspended all loans for about two months. This was because of the general credit squeeze. He said that loan funds were allocated quarterly, and there could be no more lending until the next period. He said, however, that when loan funds were again available the company would continue its previous policy c* lending up to 70 per cent on houses which represented good security The manager of the Australian Mutual Provident Society (Mr C. S. Clark) said that the company was still lending up to 70 per cent, on houses It also was continuing to grant loans for farming and commerce, although when loan applications became too numerous the company would temporarily go off the loan market until the position settled. A growing part of the company's housing loans was taken uo with loans for sections, said Mr Clark. This was in co-operation with the State Advances Corporation building scheme. The Norwich Union Life Assurance was still on the loan market for loans up to 70 per cent., said the manager (Mr A. 0. Keegan). The company had increased its rate to 6 per cent, a few weeks ago. Interest Rates Some lending institutions have not increased interest rates. The Sydenham Money Cub’s rate is still 51 per cent., and it is lending up to 66 per cent on houses under seven years old and 60 per cent, on houses over seven years old. The Northern Building Society has retained its interest rate of 51 per cent. The Christchurch manager (Mr G. A. Wilson) said that the society was still lending up to 70 per cent., on good residential houses or new

houses. At present applications from members were granted provided there were funds available in the group in which they held shares. He said it was not the policy of the company to increase interest rates until the general rate had firmly settled down. Legal firms have increased the interest rate to 6 per cent. Lawyers who were pokcn to agreed that loans were hard to obtain. They were not mainly concerned with loans for housing, as the insurance companies, for their clients usually wanted flat mortgages, whereas insurance companies operated on reducing mortgages. Several land agents said that as the difficulty of getting loan mohey increased the demand for old houses should have decreased. However, there appeared to be no slackening in the demand at present. Whether this would last if the insurance companies had to bring in more restrictions could not be foretold.