‘Freeze’ inquiries

Press, 19 August 1982, Page 12

‘Freeze’ inquiries

The Reserve Bank in Christchurch has been flooded with inquiries since • the price freeze was introduced .on June 22. The bank's manager, Mr Ron Wilton, has said that there had been “a lot of misunderstanding” of the freeze regulations, especially as they applied to interest, rates. “The telephones have been going fairly constantly,” he said. Many people had thought that their interest charges could not be increased during the 12-month freeze period, but it wqs more complex than that, he said. Interest rates were frozen on November 25 last year, through the provisions of the financial services regulations

administered by the Reserve Bank. Effectively, lending institutions were prevented from increasing their maximum interest rates after that date. The freeze did not apply initially to loans of less than $lOO,OOO, but the cut-off point was reduced from midnight on August 2, to $lO,OOO. Borrowers paying lower interest rates than the maximum being charged by the lender on November 25 could have their interest payments increased when the loans were reviewed, Mr Wilton said. “The lender is entitled to increase the rate to the top level that he was. charging to other lenders at; that time but he cannot go beyond

that,” he said. The regulations as at August 2 ■ had imposed a maximum interest rate on all loans of more than $lO,OOO, but lenders could not “automatically" increase their rates to that level. They were limited to the maximum rates that they were levying on November 25. This meant that people who were borrowing at cheaper rates than were current at the time of the freeze were liable to have their interest charges increased, he said. “If they were paying a ■ lower rate before the freeze was imposed, it was their good fortune at the time — but it can be raised to the limit," Mr Wilton said.