COMPETING FOR LOANS

Evening Post, Issue 37, 13 August 1934, Page 8

COMPETING FOR LOANS

The possibility of the Stale Advances Office losing its best assets as a result of properties being paid off with money borrowed at a lower rate of interest was mentioned by Mr. Dickie when the House of Representatives was discussing the Advances report. With 4-J- per cent, loans this is not likely to go far. Yet even with these there may be a transfer of money from the Post Office Savings Bank where it earns 3 per cent, lo pay off loans costing 4J-. With the later, higher-rated loans, however, there is the danger which Mr. Dickie mentioned, and ihe drawback from the lender's point of view will bo that ibis discharge of mortgage debts will be made by the sUjsuigesl borrowers. Those who have

; found difficulty in meeting their commitments cannot generally offer the margin of security which would allract a lender at lower rales. Any movement, therefore, will tend to leave the Department with a greater proportion of doubtful loans'. While the compulsory reduction applies to bring rales down to 5 per cent, ihcro is only i per cent, difference between this rale and what the Minister of Finance has said is the market rale. But when the compulsory reduction ends the State Advances and other Government lending departments may have to consider whether their long-term loans can remain at the present figure. As we remarked the other day, the reduction of interest rales is not altogether so simple as

it seems,