LOANS AT 4 1-8 PER CENT.

Hawera Star, Volume LIV, 26 August 1935, Page 7

LOANS AT 4 1-8 PER CENT.

FARM MORTGAGES CORPORATION FIXES RATE STOCK ISSUE OF £500.000. (By Telegrnpn —Tress Association,) WELLINGTON, Aug. 25. Tlio rate of interest charged by the Mortgage Corporation on loans to be made out of its first issue of stock will be 4 1-8 per cent. Where repayment is made over 4.1 years by instalments the total annual charges on mortgages will be 5 per cent. The corporation is issuing £500,000 in stock at 3 3-S per cent.

All State mortgagors transferred to the corporation have the right to require the variation of their present interest rates to the corporation’s lending rate announced provided they agree to contribute 2 per cent, of the outstanding principal to the reserve fund either by cash or an addition to the mortgage. The chairman of the board of management of the Mortgage Corporation, Sir William Hunt, announces that an agreement in principle has been reached in regard to the amount of stock to be issued to the Government in consideration for State mortgages now vested in the corporation. All interest due but unpaid in respect of mortgages up to the date of transfer belongs to the Crown, but arrangements have been made whereby the corporation will as far as possible collect the arrears of interest .and, to enable this to be done, the amount of arrears as at the date of transfer will be added to 'the contingent liability to the State. The proportion of accrued interest as at the date of transfer as well as the difference between the nominal amount of stock to be issued to the Government and the aggregate amount of stock to be issued to the Government mortgages taken over will also be added to the contingent, liability account. The contingent liability will remain until the real value of mortgages can be ascertained by experience over a period of years. The directors have given consideration to interest rates, both from the borrowing and lending point of view, and. it has been decided for the initial flotation to make available an issue of slock and debentures to the total of .£500,000 with a currency of 25 years, the corporation retaining the right to redeem the issue at the expiration of 20 years. The interest rate has been fixed at £3 7s (id per cent. The same interest rate in terms of the Act will apply to the stock to be issued to the Government. As required by the enabling Statute, the proceeds from the issue will be invested on first mortgages of satisfactory securities.

It. has been decided to announce a lending rate of 4 1-S per centum per annum for moneys available from the first debenture issue. On a 45-year term the annual instalments required to pay both interest and principal, including provision for the reserve fund, would "lie approximately 5 per cent.