FARM INTEREST RATES.

Matamata Record, Volume XIV, Issue 1193, 5 February 1931, Page 4

FARM INTEREST RATES.

THE question of interest charges, as discussed by the Rotorua subprovincial executive of the Farmers’ Union at a recent meeting at Putaruru, is fraught with difficulties. A sound case can be made out for a reduction in the high interest rate now ruling, more especially as it affects rural security, for agricultural or land banks have proved most successful in other countries, and it is idle to suggest that such banks would not be equally successful in New Zealand. That, however, is looking at the matter purely from a national point of view, and it is when an endeavour is made to particularise that the difficulties many individuals would be up against become apparent. As one delegate remarked, “No tribunal would be given power to reduce interest charges as between private mortgagees and mortgagors.” Therefore, while such a tribunal might possibly do good work in assisting with negotiations, poyjer to modify privates, conti’acts in one direction only is too much to ask. : ;

In discussing this question it must ever be remembered that in practically no other country in the world is it so easy for an inexperienced beginner to acquire a farm with so little financial interest as in New Zealand. This factor in itself, owing to the extra risk attached, tends to raise and keep raised interest rates on such security. It is only natural that, jf a farmer’s financial interest in a particular farm is only a minor proportion of its value, few beyond the seller would care to take the risk of loaning the balance of the purchase money, and that these few would demand as high an interest rate as possible. Further, it is not at all likely that any farmers’ bank would take over many of the liabilities that would be offering, ter how great the funds at the bank’s disposal. Such banks, when operating, certainly lend money out at low rates, but in all cases the margin of security insisted upon is far greater than prevails in hundreds of cases in New Zealand as between private mortgagee and mortgagor. In fact in some cases the purchase of farm j lands in New Zealand has been in 1 the nature of a pure gamble, so little has been the buyer’s interest therein.

It is this safeguard that is essential if cheap money is to be obtained, for a low interest rate demands the minimum of risk. While the effort to secure a national reduction in interest rates is a sound and wise move it would appear that individual cases must be left for amicable negotiation. No mortgagee is likely to turn a farmer off his property, though of course there is always the exception which proves -the rule. The latter, however, cannot very well be brought under a compulsory national scheme, for the reasons already stated. Briefly put, a national scheme would compel a margin of safety which would preclude a gamble, and would also assist in reducing the gambling element in individual cases in which the mortgagor’s interest was not suf-

ficiently large to enable him to take advantage of any national scheme. This, together with an advisory

board to which application might he

made in cases of hardship, appears to be the limit to which it is possible to go, for no case has been made out for a one-sided compulsion, as suggested by the discussion referred to, in regard to a private contract made between two parties both of whom presumably entered into the same with their eyes open.