Plans for mortgage stability

Press, Volume CXV, Issue 33791, 13 March 1975, Page 3

Plans for mortgage stability

(N.Z. Press Association)

WELLINGTON, March 12. The Government is studying ways to increase the stability of the mortgage market. The Minister of Housing (Mr Douglas) said this evening that several proposals had been looked at by the Cabinet and were now being investigated by the Treasury. The inherent instability of the money market had been completely ignored in previous housing policies, he said. “Any Government, to have an effective policy of sustaining dwelling production long-term, must investigate alternative sources of longterm finance.

“Election year promises of a few more dollars in housing finance from this source or that, do not get to the root of the problem.” ‘HIGHLY UNSTABLE’

The need to restructure the mortgage market was the particular responsibility of the Minister of Finance (Mr Tizard) but it was one of the most important phases of the Government’s housing policy, said Mr Douglas. At least half of all housing investment came through private lending — particularly through solicitors — rather than through institutions

.such as the Housing Corporation, banks, insurance comipanies and others. ! Institutional lending could 11 be controlled and was stable. .'But private lending was •I “highly unstable,” being I mainly short-term and fluctu[ating markedly according to , i economic conditions. ■ i Because short-term mort- ; j gages were falling due every : 5 year, home-owners re- ; [financing were placed in [direct competition with new [borrowers trying to finance their first home, said Mr I Douglas.

In practice, established borrowers were usually given preference over new bor-

rowers. Thus, when the economy took a downturn, investment in new housing from non-institutional lending sources dried up very quickly. LAND SALES Referring to the Government’s land-buying policies, Mr Douglas said this was not a case of the State squeezing out the private man—the Government was committing itself to the future in support of the private building industry and the eventual benefit of the private home buyer. The availability of cheaper sections such as would be provided by the Housing

Corporation would benefit the small builder who had been getting squeezed out. The eompetition thus engendered between the largescale developer and the small builder would benefit the industry and the home buyer.

Although the corporation would not be able to handle the entire demand for lowcost sections, its policies would help to stabilise prices generally. Mr Douglas said the Government’s ultimate aim was that the corporation would produce up to 25 per cent of sections being sold on the open market.