Mortgage rates at C.S.B. to rise

Press, 24 May 1977, Page 6

Mortgage rates at C.S.B. to rise

Because rates offered on savings would be higher this year, the present mortgage rate of 8| per cent for home finance up to $20,000 offered |by the Canterbury Savings ißank would need to rise, the I president (Mr J. Mathison) said in his annual report yesI terday. Commenting on the report, the general manager (Mr F. Dickson) said yesterday that, at present, of all the reasonable applications received by the bank for housing loans, about half were declined, because of the lack of available funds. “It is a question of supply and demand,” Mr Dickson said. “Our ability to lend money for housing depends on our ability to attract funds. If the Government would allow us to compete with the private sector for interest rates and loans to obtain funds, then we would have more finance available for housing loans at a lower rate of interest.” It was likely that, within the next month or so, the C.S.B. would apply to the Government for an increase of about 1 per cent in its interest rates on savings, Mr Dickson said. At the moment, the maximum rate was 9 per cent for a five-year bond. “We would like to be able to offer about 10| per cent for five years,” he said. “This' would make a significant impact on the public attraction.

and would open the bank up: to compete for funds.” Mr Dickson said that this rate could be financed by an increase of about 1 per cent on the bank’s current mortgage rate. The average mortgage rate offered by all non-State companies was 10.9 per cent, although most were between 12 and 14 per cent, he said. The rate of 81 per cent, set by the; Government for the C. 5.8., was the lowest rate offered, by anyone except the Hous-] ing Corporation. Mr Mathison said that the rate was too low at present,] but had been held at that] level in the public interest. ■ “It is inevitable, in any event, that the rate cannot be held at 8J per cent when the three-year deposit rate is 8 per cent and the five-year rate is 9 per cent,” Mr Mathison said. “Particularly if due regard is held for the vast sum of nearly S6OM ‘locked in’ through the Government stock ratio, earning an average of less than 5.9 per cent.” The time was long past when any Government, its economic advisers, and the public, recognised the injustice and inequity of a system which restricted the most efficient financial institutions wihle giving free reign to a large fringe area, he said. “There is a total lack of logic which allows or encourages the public to deposit i funds in a high-risk area at 'rates of 12 per cent, where

the charge-out averages say 122 per cent, against a maximum deposit rate of 9 per cent permitted for trustee banks and a charge-out rate maximum of 104 per cent,” said Mr Mathison.

I Trustee banks, proven to be | the most efficient and secure lenders, should be able to compete for funds. ' Competition for funds by (trustee banks would not only give savers a better deal and . promote more low-interest rate mortgage finance, but 'would also bring about a decline in the interest rates igenerally on housing finance as a result of the greater availability of mortgages. This would thereby reduce a major cost-push factor in the economy, he said. The C.S.B. would erect new facilities on sites which had been purchased in Kaiapoi and Motueka. Plans were also being prepared for new extensions at Papanui, and new premises at Addington and Ham. “We look forward to these further moves away from paying increasing rents to landlords,” Mr Mathison said. “I trust that before too long, trustees and staff will no longer feel embarrassed at the inadequacy of the facilities provided for our depositors, who are the life-blood of the bank.” C.S.B. funds—page 2