TO SAVE THE SYSTEM

Evening Post, Volume CXVIII, Issue 35, 10 August 1934, Page 8

TO SAVE THE SYSTEM

j The -annual report of the Stale > Advances Office reveals the difficulties that are being encountered in the endeavour to hold the balance fairly between borrowers and the whole of the people (as lenders). No one would desire to see the State become a harsh mortgagee, and we think there is no fear of this. At the same time the State cannot step aside and I relieve its debtors in order that they j may give greater preference to other creditors. For the present' the task of managing the business demands the whole attention of the Advances Office, but when the difficulties have been lessened an investigation should be made to discover wherein the system has been found faulty. It may be claimed that the position is, comparatively, not serious; that the percentage of arrears to advances I outstanding (5.519) is less than many other lending organisations would show. It is not quite clear whether this percentage includes principal instalments held over and capitalised interest arrears. But it, must be remembered that advances for ths most part have been on safe margins (90 per cent, loans can be only a small part of the whole), at low interest and conservative valuations. We are not able to judge, as no analysis is available, but it is possible that many of the mortgagors now find themselves in difficulties because they have bought properties at prices far exceeding the valuations on which the advances were made. This has absorbed their available cash and in consequence they are much less able than the original mortgagors to meet their commitments. If this is so it is a strong argument for changing the system so that no trading in Advances loan properties shall be permitted until the owner's equity is substantial and even then the buyer's soundness shall be examined. The Advances system was | designed to help settlers to acquire farms to work on and dwellings to live in—not for speculation. If a useful system is to be saved it must! be further .safeguarded against] abuses. _____________ ■