Post Office interest rate down again

Press, 5 August 1983, Page 3

Post Office interest rate down again

First mortgage money is available to holders of Post Office home ownership accounts at the rate previously charged by the Housing Corporation.

The Postmaster-General, Mr Talbot, said yesterday that the new loan would be let at 9 per cent on terms ranging from five to 25 years.

This surprised private sector lenders as it overturned an announcement made by the Prime Minister, Mr Muldoon, on Tuesday, that the Post Office would charge 10 per cent on first mortgages — a rate which the deputy manager of the Canterbury Savings Bank, Mr R. T. Bray, said would be very difficult to compete with. The general manager of the C. 5.8., Mr Frank Dickson, said yesterday that the bank could not be expected to match the Post Office’s rates and that they would not necessarily become a bench mark for private lenders. The Post Office would have to be subsidised to meet the demand that the cheap loans would generate, he said. “People will just swamp it and there is simply not that much money to lend.” Although he agreed with the Government’s policy of bringing interest rates down, he said that for private lenders it .was “an extremely complex issue” because they had to protect business viability.

He said that the C.S.B. could not allow itself to be “stampeded into an unfortunate position.” Its first responsibility was to protect the security of depositors’ savings and to pay a decent return on them. “What the Government wishes to do with its money and how much taxpayer subsidy it wishes to put into that area (the Post Office) is a matter for the Government to decide,” said Mr Dickson. “Private sector lenders cannot lend at those rates and at the same time give a competitive return on deposits,” he said.

The president of the Building Societies Association, Mr R. E. Broad, described the new rates as “a second bite at the cherry” and said that they were “highly competitive” and lower than the private sector could offer.

Other details released by Mr Talbot yesterday were a $30,000 limit on the Post Office first mortgages and a qualification that applicants for that amount would need to have had an average minimum monthly balance of $2OOO over the previous 12 months and at least $2OOO in their account for nine of those months.

He also announced the •rates for other Post Office lending services: It would charge 10 per cent for second and subsequent mortgages, 9 per cent for secured personal loans, 10 per cent for partly-secured or unsecured personal loans, 11 per cent on cheque account overdrafts, and 12 per cent on Bankcard credit. Three other Government departments — the Rural Bank, Maori Affairs and the Housing Corporation — also reduced their interest rates. The cuts take effect from July 28, the day after Mr Muldoon announced that the Government stock rate would drop from 14 per cent to 8 per cent. The Minister of Housing, Mr Friedlander, said yesterday that normal interest rates for Housing Corporation loans to those who qualified under the modest income criteria would now range from 5 per cent to 7.5 per cent. Previously the interest rate for that group of borrowers was between 5 per cent and 9 per cent. The Minister of Maori Affairs, Mr Couch, announced that the same rates would apply to Maori housing loans as would be charged by the corporation and that the upper limit for Maori Affairs rural loans was reduced from 9 per cent to 7.5 per cent. He said that he expected to see a drop in the lending rates charged by the Maori Trustee.