P.O. to charge loan fee on mortgages

Press, 3 August 1985, Page 3

P.O. to charge loan fee on mortgages

A new loan fee on mortgages, called an administration charge, has been introduced by the Post Office Savings Bank. The fee is 1 per cent of the loan, with a minimum fee of $lOO. This means that a house buyer who borrows $40,000 from the bank will pay an administration fee of $4OO, thereby reducing the loan to $39,600. The general manager of the Christchurch P. 0.5.8., Mr George Ware, said that the loan fee brought the Post Office into line with other mortgage institutions. “I am not aware of any mortgage institution that does not charge an administration fee,” he said. Mr Ware said that the fee had been introduced because the costs of arranging mortgages had risen. “It is an attempt to recover some of the costs that in terms of staff and resources are incurred,” he said.

The loan fee was introduced late last month, at the same time the maximum loan available to Post Office customers was reduced from $60,000 to $45,000. Details were not yet finalised, and so the fee had not been charged yet at the Christchurch branch. Mr Ware said he was waiting for word from Wellington. The tighter criteria, in effect since July 22, had “significantly reduced” demand, for Post Office mortgage money, Mr Ware said. The bank had an unprecedented demand after the Government announced a new loans package in April. In May, the Post Office poured $l4 million into the Christchurch housing market.

The Post Office approved last month just on $9 million to about 300 applicants in Christchurch.

Mr Ware said he thought that demand would tail off.

“I believe it will settle back to the level of last year — about $2 million a month,” he said.

An announcement by the Post Office of an administration fee on housing loan applications has “bemused” the New Zealand Law Society. The society’s treasurer, Mr Malcolm Dunphy, said yesterday that the Government should show consistency. “First the Housing Corporation maintained it could represent home purchasers it finances at a cost of $250,” he said “It eased this up to $4OO after representations from the Law Society which regarded, and continues to regard, the corporation’s approach to costing as naive and lacking in objectivity. “Now the Post Office sets a fee of 1 per cent, $450 on a $45,000 loan, solely for processing the loan application; that is, excluding entirely the conveyancing aspects of the transaction. “Surely both cannot be correct,” said Mr Dunphy.