Govt move ‘con job’

Press, 10 November 1983, Page 6

Govt move ‘con job’

PA Wellington

The Government’s move to regulate mortgage interest rates is “a con job” that would result in less money being available for housing and more shady practices, according to the Opposition. Speaking during a snap debate in Parliament yesterday the Labour Party’s spokesman bn finance, Mr R. 0. Douglas (Manurewa), said the regulations imposing limits of 11 per cent on first mortgages and 14 per cent on secpnd mortgages would not work. The amount available for lending bn homes would dry up and the only people who would get loans would have to pay hidden costs that would push the true interest rate well beyond the limits. The Associate Minister of Finance, Mr Falloon, replied that the Government was committed to bringing interest rates down, and while the Labour Party had

traditionally supported lower interest rates, it now seemed to have “jumped the fence” and wanted high rates.

Mr Falloon said the Government’s policy since 1981 was to bring interest rates down, and financial institutions had plenty of warning of what the Government wanted.

Mr Douglas referred to the Government’s decision to make Housing Corporation loans available only if the applicant could get a second mortgage for less than 14 per cent “That did not even last one day before the sharp boys wbrked their way round it,” he said. People arranged loans where the disclosed interest rate was 14 per cent but the true rate was nearer 20 per cent, Mr Douglas said. He read a letter, which he said was from General Finance to a builder, to illustrate the point. The letter offered special loans

for people wanting Housing Corporation mortgages. It offered finance at a rate of 14 per cent, but said the builder would have to pay, on settlement, a “fee” of $7O for every $lOOO borrowed. That gave an effective interest rate of 19.5 per cent but because of the way it was done it was within the regulations. Mr D. F. Caygill (Lab., St Albans) described the move as a fraud, said it would not work, and would not lower interest rates. It would usher in reintroduction of the $1 mortgage, he said, where people could obtain a $1 mortgage at 11 per cent and a second mortgage at the higher rate. The Minister of Energy, Mr Birch, asked whether the Labour Party opposed reduction in interest rates or whether it wanted high interest rates for people wanting mortgages.

The Government action would bring interest rates down, he said.