Interest rates still above Govt 14 p.c. guideline

Press, 9 November 1983, Page 6

Interest rates still above Govt 14 p.c. guideline

Wellington

Recent interest rates arranged by a number of loan sources are above the 14 per cent the Prime Minister, Mr Muldoon, has indicated he wants if regulations are to be forestalled. Mr Muldoon warned on Monday that the Government could, yet introduce regulations to enforce its campaign on rates, and yesterday a Law Society survey told him yields arranged by its own members included interest to about 16 per cent while some other sources had higher rates.

The information was gathered last week through samples by district law societies of some firms. They sought details of the last two loans arranged for clients. Solicitors’ rates revealed were in a range of 14 to 16 per cent, the survey said, while loads from elsewhere included first and second housing mortgages from a finance company at 17 and 18.5 per cent respectively. The Law Society’s president, Mr Bruce Slane, told Mr Muldoon in a letter the survey showed that loans made through solicitors were not out of keeping with loans being charged by lendirig institutions. “In fact, the rates

charged by solicitors’ clients are now in many cases significantly below the rates charged by the lending institutions for similar propositions. As far as I am aware this is a new development.”

Mr Muldoon has waited for the survey results since three weeks ago he said the Government caucus had put off the possibility of introducing regulations to bring rates down, and decided to let solicitors lower their rates.

The society was confident its members would “bring their rates down to a maximum 14 per cent,” Mr Muldoon had said.

Mr Muldoon had singled out lawyers’ rates and also said then that he had talked to stock and station agents, finance houses, and trading banks and interest rates were “moving in the right direction.” Mr Muldoon said last evening that the Law Society letter had not been considered and he did not have a comment. Mr Slane said some institutions’ rates which were normally comparable with but below those of private lenders through solicitors had not moved down as much as the rates of private lenders through solicitors. He also said society mem-

bers had “volunteered some interesting information” about loans from sources other than private lending through solicitors.

The information included a merchant bank offering $400,000 and $600,000 on a 10-year table basis at an interest rate of 17 per cent negotiable downwards on the strength of the borrower.

A finance company loan had a rate of 19.4 per cent for first mortgage and collateral security over a vehicle.

A building society commercial loan was at 17 per cent, and a bank personal loan at 17.5 per cent. In October a Wellington firm received two loan applications approved by a trust company, one for $75,000 and another for $160,000. In each case the term was five years and the rate 18 per cent with no review provisions. A number of district law societies said members were advising clients that rates were falling. Some firms had indicated that they were advising clients they should be prepared to accept no more than 14 per cent.

Mr Slane said that over all he was pleased with the response from lawyers.