Trustee banks lent most for housing

Press, 19 June 1986, Page 30

Trustee banks lent most for housing

PA Wellington Trustee banks have lent more for housing in the past year than any other private-sector financial institution — more than $3OO million — and have 75 per cent of their lending in home mortgages, the president of the Trustee Banks Association, Mr Noel Toomey, said in his review for the year ended March 31.

“Nationally, trustee bank mortgage lending is now running at more than $l2 million a week,” he said.

“Most trustee banks have already announced reductions in interest rates, which will continue if the present downward trend in deposit costs is maintained.”

Mr Tobmey said the trustee banks had a longterm commitment to the housing market.

The recent removal of the requirement for trustee banks to hold 38 per cent of their deposits in Government Stock would enable a greater investment into the home-mort-gage market as these existing stock holdings of $1.2 billion matured. “The massive Government Stock holdings that the trustee banks have

been required by law to hold, and which earned an average of only about 12 per cent, has imposed a heavy and inequitable burden,” he said. “The compulsory requirement to hold Government Stock has meant that trustee banks were, in effect, subsidising the Government, and this resulted in higher mortgage rates than would otherwise have been the case.”

No other private-sector financial group had been

penalised by high Government Stock requirements to the extent of trustee banks.

“In spite of this handicap, trustee banks have been able to lend at rates no higher than their major private sector competitors,” Mr Toomey said.

During the year under review, trustee banks had increased combined earnings by 10 per cent.

This result would be recognised by borrowers as evidence that trustee banks had exercised restraint in holding interest charges to a minimum. Moreover, total deposits of the banks had increased by a moderate 11 per cent in the year to March — less than the rate of inflation and proof that no attempt was made to increase depositmarket share at the expense of hard-pressed borrowers.

Savers in the year under review had also benefited from the new products and innovation. Apart from competitive deposit rates, all banks now paid interest on cheque accounts, cash prizes were introduced on Hit accounts, EFT—POS facilities were installed in petrol stations and supermarkets, customeractivated in-branch teller machines were first introduced in hiew Zealand by trustee banks, and a direct debit service was developed.

Total assets had risen to $4.2 billion, which placed trustee banks in the same size range as the trading banks. Trustee banks had achieved this result with deposits from personal customers only. “We expect regulations prohibiting a greater in-

volvement with commercial customers to be removed this year to permit us to meet a wider range of community needs,” Mr Toomey said.