MORTGAGES & INTEREST RATES

Greymouth Evening Star, 12 November 1932, Page 12

MORTGAGES & INTEREST RATES

NEW BILL’S PROVISIONS. [SPECIAL TO “STAB.”] WELLINGTON, November 11. Several important amendments to the National Expenditure Adjustment Act to remove anomalies that have been found to exist, were introduced in the House, to-day, by Governor’s Message. , Provision is made for the exclusion of insurance policies from the category of chattels, and to give the mortgagors of such policies the right to claim the same reductions as if this view of the law had always been admitted. Some, if not all, insurance companies have treated their insurance policies as chattels, and have accordingly declined to make any interest reduction below 6 A per cent. Another clause makes it clear that debentures on “demand” mortgages, ar© not exempt from the reductions, unless they are exclusively secured. There is a further provision regarding the reduction in interest on company debentures, and debenture stock. The effect is to exclude in the case of such securities the provisions of the principal Act as to hypothetical rate of interest, and also the provi-. sions as the apportionment of principal moneys, as between chattels and. ether property. The result is that the minimum below which interest is not reducible, is fixed at 5 per cent., and the actual rate of interest, fixed by security, is always to be taKen as the basis of the reduction. The amendment is made retrospective. “Peak” interest rates are dealt with in the principal Act. It was assumed that interest rates were at their peak on January 1, 1930. It has been represented that certain lending institutions had substantially reduced their rates before that date, and the object of the clause is co enable the Gover-nor-General to alter the date to any one intermediate position, January 1, 1925, and January 1 1930, so as to give the institutions concerned the benefit of the' reductions’that had been voluntarily made to their clients.

A further clause of the Bill deals with the question of ground rentals. The object of the original Act was to protect ground rents from reduction, unless in any case such rent exceeded 5 per cent, of the unimproved value of the land, in respect of which it was I ayable. The Minister of Finance pointed out that when the Act was passed, that provision might operate inequitably as between the local authority or other lesssor concerne-’ or the lessee and sub-lessees. The object of the new clause is to give the persons interested in ground rents (either as lessors or tenants) an opportunity to make representations on the proposal. The repeal of the section of the Ac! which gave the rentals affected the partial exemption mentioned. The provisions of the part dealing with stamp duty are amended. It fs io be made clearer that securities heli! by Government trading departments are subject to the stamp duty imposed by the original Act. It was laid down in the principal that its provisions had no application to ordinary securities issued after the passing of the Act. There are certain cases, however, where the holder of one form of security voluntarily exchanges it for another, and it is proposed to permit the issue of the new security, subject to the same conditions as to stamp, as the surrendered security. The main Act provided that the net amount of the stamp duty collected in respect of securities issued by local authorities be made payable to them. There are cases where the real bur-

den of debt, represented by the security, is borne by some other local authority, and it is now proposed to permit the benefit of the stamp duty being received by the local authority actually responsible for the debt. It is proposed to bring within the term of investment society, an individual who may, under his*own or an assumed name, be carrying on the business of accepting moneys on deposit.

Another provision requires building societies to furnish quarterly returns of deposits held by them. In respect of institutions accepting money on deposit, there is a machinery clause drawing a clearer line of demarcation between investment societies and trading companies. In the principal Act provision • was made for fixing rates of interest payable on deposits by savings banks, building societies, investment societies and trading companies. The Bill makes corresponding provision as to the rates of interest to be paid by local bodies on deposits received by them. .It* savings banks, building societies, investment (societies, or trading companies pay, or offer to pay, a rate of interest in excess ‘of that fixed, they will be liable to a fine of £lOO, and the trustees, directors and the principal administrative officers to a fine of £2O.