INTEREST RATES

Dominion, Volume 25, Issue 266, 5 August 1932, Page 12

INTEREST RATES

Mortgaged Life Policies NOT TO BE “CHATTELS” Legislation will be introduced next session to clear up a misunderstatiding concerning the new law relating to interest reductions and to ensure that “chattels” does not include a life policy. This statement was made by the Prime Minister, RL Hon. G. W. Forbes, yesterday, in referring to mortgages on insurance policies. . Mr. Forbes explained that in terms of the National Expenditure Adjust? meat Act, interest on all mortgages to which the Act applies is reducible, by 20 per cent., but that it is provided that the net rate of interest payable under a mortgage of chattels shall not be reduced by the operation of the Act below GJ per cent, and the net rate payable under any other mortgage below 5 per cent. "A mortgage of a life policy is a mortgage under the Act,” said the Prime Minister, “but it is reported that certain insurance companies are treating mortgages of their policies as mortgages of chattels, with the result that such companies have declined to reduce the rate of interest ( payable on loans secured on policies below 6} per cent. Complaints have been made to the Government by policyholders regarding the action of such companies.” It was not the intention of the Government when the legislation was passed, said Mr. Forbes, that life policies should be treated as chattels, the higher minimum rate on chattel mortgages being intended to apply only to mortgages of such things as stock, furniture, and other tangible articles. He added that while not agreeing with the legal interpretation placed on the Act by the companies in question the Government realised that it would be unfair to leave it to individual policyholders to challenge in the courts the action taken by the companies, and accordingly it was proposed at. the forthcoming session to introduce legislation declaring that the word “chattels” as used in the Act does not include and has never included a life policy.