Restrictions on building societies to be relaxed

Press, 27 November 1982, Page 6

Restrictions on building societies to be relaxed

Parliamentary reporter . j Restrictions on the ways building societies can use their money will be relaxed when a bill which was introduced yesterday is passed by Parliament.’. ■,;./. • ,:5 /’ Introducing the Building:; Societies Amendment Bill, the; Minister, of finance, Mr Muldoon, said the new;: measures were a trade-off ¥for ? the greater tax liability imposed on building societies in-this year’s Budget,. :The changes to the- Build-ing-Societies; Act; 1965, will;;

/give building societies greater, freedom in lending money and will allow them to lend on second mortgages and to invest surplus funds. The bill will extend? the ways, in which a building society can lend money to its members. At least 85 per centof ..funds must .be . lent for residential purposes, al-, though the definition of residential purposes has been extended to include alterations and' maintenance, as well as buying or building a home..

The bill will also repeal provisions which restrict lending on second mortgages; Although the Opposition did not oppose the bill, which was referred : to a select committee for study, Mr F. D. O’Flynn (Labour, Island Bay) said it would do little to help people who wished to buy a home. The provisions allowing building societies to lend on second mortgages would enable them to lend : money at higher interest rates. . :

However, to help home buyers the percentage of the property valuation that could be granted On first, mortgage should. be increased. The hurdle for most people who wanted to buy a home was high interest rates/ The building, industry would only “get a shot in' the arm” if more+people were, encouraged . to - buy. homes. Any move thht stopped short of genuinely increasing the, funds available for . home building would not boost the building industry and the economy, he said.' " ‘ Mr O’Flynn said the new measures could also cause increased competition for savings banks ?