Tepid reaction to home loan policy

Press, 25 May 1984, Page 5

Tepid reaction to home loan policy

Property reporter

Private-sector lenders are unimpressed by changes to the Home Ownership Savings Scheme announced this week.

The Minister of Housing, Mr Friedlander, has estimated that the new policy will save the Government $3O million in the first year. That is the figure which, under the old regime, the Housing Corporation would have provided to account holders in supplementary loans toward the purchase of a home.

Responsibility for the loans has now been switched to the private sector and, to ensure that the extra burden does not reduce their lending capacity, the funds so spent are to be excluded from the 1 per cent a month credit growth rate restriction.

The loans were available from the corporation to $7500 for 10 years at 8.5 per cent. Under the new system, borrowers will pay the same rate but because the Government will provide a subsidy of 2.5 per cent, lenders will get an interest rate of 11 per cent on their money.

Mr Friedlander has presented the new policy as an attempt to encourage private institutions to take part more in providing home ownership account facilities, but some think it may have the opposite effect. The president of the Building Societies Association, Mr Roy Broad, said yesterday that the Government was asking lenders to fund a benefit which was part of its own scheme. The interest rate subsidy had “always been avail-

able,” lie said. But the exemption from the 1 per cent credit growth guideline might be helpful.

“The decision which individual building societies must now make is whether to themselves top up beyond the normal limit loans to applicants with matured home ownership accounts," he said.

Re thought that decisions would probably be made on an individual basis which ensured that available funds were spread fairly among all loan applicants. The general manager of the Canterbury Trusteebank, Mr Frank Dickson, said that it was impossible

to predict whether the credit growth rate exemption would offset the extra spending that the bank was committed to under the new policy.

Some months it might, others it might not. he said.

The bank’s customers had borrowed just more than $3.5 million from the corporation under the loans scheme last year and Mr Dickson estimated that the figure this year would be at least $1 million higher. To satisfy the extra demand without compromising other lending, the bank would have to attract an extra $7 million to $4.5 million to fund the loans

and the rest to meet its Government stock commitments, he said.

The corporation's deputy manager in Christchurch, Mr Brian Atkins, said that account holders stood to lose nothing under the new regime. The Government would continue to provide the “direct hand-outs" available to them.

The only difference, he said, was that the loans would be paid by the institutions they saved with, not by the corporation.

"Most lenders will be reasonably happy to pick up the tab. The money will just come from their pockets instead of ours.”