Welcome reduction in interest rates

Press, 12 June 1978, Page 20

Welcome reduction in interest rates

Marac Holdings, Ltd, has given financial markets a long-awaited lead, and is reducing its interest rates in its new prospectus — by as much as one percentage point in most cases.

In a press release the chairman of the Marac group of companies (Mr J. C. Fletcher) says that he believes that his company’s move indicates trends for others in the near future.

The announcement says; that last November, when: iannouncing the half yearly: result to September, 1977, ■Mr Fletcher noted that inter-: est rates are at their highest level ever but appear to have peaked and should I start to decline next year. This statement came after a ■period of extremely tight liquidity and high inflation, which saw interest rates move up right across the board on a number of occasions as finance companies sought sufficient funds to meet the demand being placed on them. Subsequent events bore this out and Marac reduced its prospectus interest rates in January and again in March as the company reacted to market conditions persisting at the time. Liquidity improved i i markedly during the December and March quarters, and consequently enabled Marac to more easily meet the demand which was being made on the group’s services, the statement says.

“The first two months of the current financial year have seen a further easing in liquidity conditions. However, during this period only minor downward adjustments were made to interest rates by a few finance companies — with top rates being maintained at around the 12| per cent, to 13 per cent level. Reference to this was given by the chairman in reviewing the 1977/78 financial year when he noted that at the time of writing his report there were no indications of any major softening of interest rates. I “Since then the 1978 Bud-j get has been released and it: contained in outline the' directions in which the Gov-1 ernment wants liquidity and

economic activity to move during the remainder of the current financial year. It : stated that ‘Prospects are for i a considerable increase in i the general liquidity of the ; economy with substantial deposit growth in the finan- i cial System.’ At the same ‘ time the Government has ; emphasised that while some stimulus is required to econ- i omic activity, a close watch I will be kept on any recovery;! to ensure that any devel- i opments regarded as excessive and unsustainable i will be immediately brought': under control. ii “It is in the context of the i above comments and our : current position that Marac Holdings, Ltd announces a; i marked reduction right , across the board in theh interest rates currently) Offered in prospectus No 6.. )

It is believed that this move, which is the most significant in the market this year, not only indicates trends for others in the near future but also reflects the fact that a flexible interest rate policy does cause interest rates to fall as well as rise,” the statement concludes. The new rates (with the old in brackets) are set out below, first for secured debenture stock and next ferr unsecured depsits. Three months, 8, (9); 6 months, 9 (10); 9 months, 10, (10|); 1 year, 11, (12); 18 months, 11, ( —); 2 years, 11, (12); 3 years, 11J, (124); 4 years, 111, (121); 5 years, 114, (124); 6 vears, 114, (124); 7 to 20 years 11, (12); At Call, 7 (7); 3 months, 9, (10): 6 months, 10 (11); 9 months, 11, (111); 1 year, 114, (124).