Thousands to pay less for their mortgages

Press, 8 March 1984, Page 1

Thousands to pay less for their mortgages

Thousands of homeowners in Canterbury, Marlborough, and Nelson will pay less for their mortgages from July 1. The Canterbury Savings Bank announced yesterday that it would reduce interest rates on all owner-occupied housing loans from that date.

The reductions will apply not only to existing mortgages but to term loans raised to build or buy a home with the home offered as security. The rate on first-mort-gage money will be dropped to 11 per cent from 12.75 per cent and on second, from 15.25 per cent to 13.75 per cent. For term loans, now at 18 per cent, the interest rates will be brought down to 11 per cent and 14 per cent respectively. The Canterbury Savings Bank’s general manager, Mr Frank Dickson, said that the move would affect 11,745 borrowers with loans totalling almost $173 million.

The decision was made voluntarily. Although the Government has indicated

that it would prefer lenders to reduce their rates on existing loans, it has not forced them to do so.

The regulations imposing maximum interest rates of 11 per cent on first mortgages and 14 per cent on second apply only to loans approved after November 10, last year. For this reason many New Zealanders are still paying more.

However, the number is falling steadily and will drop further in the next few months.

Westpac has announced that it will cut its rates on all existing mortgages — commercial and housing, owner-occupied and not — on March 15.

In some cases, the reduction will be significant. Some borrowers are now paying 17 per cent on first mortgage and others, 18 per cent on second. The new rates, to apply across the board, will be 11 and 14 per cent. Those with house mortgages from the A.N.Z. Bank can also expect to pay less soon. The banking group has said that it will lower its

rates on existing loans for owner-occupied dwellings to 11 and 14 per cent in the first half of April.

The move will affect almost 18,000 borrowers throughout New Zealand, reducing their interest bills about 2 per cent. The National Bank’s chief manager of lending, Mr Cliff Grice, said yesterday that “well over half’ of its existing mortgages had been brought down to the rates imposed by the regulations on new loans. The bank had been revising them as they came up for annual review.

“We have been talking about speeding up the process by bringing some reviews forward but that is as far as we have gone at this stage. It is only a thought,” he said. Mr Grice said that some borrowers were paying 15.5 per cent on first mortgages and that “in a very few cases” 16.5 per cent was being charged on second but that all would be lowered by November at the latest. The Bank of New Zealand since January has also been reducing its rates on exist-

ing mortgages at the review date.

The chief manager of the banking branch, Mr Tom Tennent, said yesterday that the B.N.Z. was now “about half-way along the path, perhaps further” and that he expected all rates would be down by the middle of this year.

It has been reported that some B.N.Z. customers are paying 18.5 per cent on second mortgage but Mr Tennent would not disclose what rates were being charged, saying that they varied greatly and that he did not know what the highest was. He did say, however, that the reviews would bring “a good sort of reduction” in some cases.

The bank announced in January that it had temporarily withdrawn from the mortgage market but that it was still lending for home improvements. This prevails.

Other institutions which have stopped lending longterm on housing are Broadbank and Marac Finance.

Of the building societies, only Countrywide has cut

the bulk of its rates on existing mortgages. The manager of the United Building Society, Mr Colin Jenkins, was out of Christchurch yesterday and could not be reached for comment.

However, he has said that United will review its rates on existing loans when the cost of funds drops and that this has not yet happened. His secretary confirmed that the statement still applied. The manager of the New Zealand Permanent Building Society, Mr Roy Broad, said that it had not yet lowered its rates on established mortgages but that the situation was under review.

Rates charged at present “went all the way from 8 per cent to 15.5 per cent,” he said.

Mr Broad said that because home loans represented about 95 per cent of building societies’ lending, the effect on them of introducing the maximum mortgage interest rates across the board would be greater than on other financial institutions.