Manawatu Daily Times SATURDAY, NOVEMBER 28, 1925. The Mortgage Problem

Manawatu Times, Volume XLIX, Issue 2308, 28 November 1925, Page 8

Manawatu Daily Times SATURDAY, NOVEMBER 28, 1925. The Mortgage Problem

In an interesting and instructive address before members of the Pending Chamber of Commerce, Professor Murphy,‘a brilliant scholar and noted Economist, dealt comprehensively with the question of ‘‘Rural Credits". Coming from such an, authority, his statements —the soundness and impartiality of which will hardly be questioned—should prove of particular value to the people and producers of the Dominion.

Professor Murphy, in the first place, draws attention to the serious increase of mortgage—indebtedness which has taken place in the country. This indebtedness has increased from 19 to 45 per cent during the last generation, and although no doubt a fail amount of this increase is due to legitimate improvements and expansion in the primary industries, there exists to-day a large margin that is not represented by real values. This margin in most cases, represents the balance of purchase money as between buyer and seller and is nominall secured by way of a 2nd., 3rd., or even 4th. mortgage. It is this class of mortgage, which presents the greatest difficulty to-day. It is a problem that will either have to be solved or eventually will solve itself after causing much hardship, but while it lasts it will prove a real hindrance to production and will seriously retard the development and progress of New Zealand’s primary industries. Al-

though it is tacitly acknowledged by both mortgagee and mortgagor, that it is practically impossible to renew anything but a first mortgage unless it be with the present holder, there are thousands of farmers throughout New Zealand who are staggering under the interest-10. J of these 2nd and subsequenv mortgages.

The Paucity of Government Assistance

Another matter touched upon by Professor Murphy is the insignificance and paucity of the Government’s efforts in assisting the primary ■ producers by way of rural finance. He points out that out of a total amount of mortgages of £258,207,840 as on March 31st, 1924, the Government’s share amounted to the very small sum of £11,152,047, or barely 5 per cent of the total. Yet, listening to some of our politicians and financial advisers, one might easily come to the conclusion that the assistance given by the State in this direction was more like 50 per cent, not mentioning the fact that it took 30 years to make these advances.

During the last year or two, much capital has been made out of the "Mortgage Extension Act" and the Moratorium has generally been blamed for the unpopularity of rural investments and the scarcity of capital for mortgage purposes, Profcssoi Murphy confirms our contention, made on a number of occasions, that the root of this troutile lies in a different direction entirely, and may be found in the fact that investments

more tempting and more remunerative than rural mortgages, have been offering of late years, namely, local body debentures and Government local loans.

Loans Should be Raised in. London

Professor Murphy condemns the policy of the Government raising loans in New Zealand and is of the opinion that money should be raised in London. We wonder when the New Zealand Government will cease dipping its hands in pockets of local investors,

thereby depriving the primary and secondary industries of capital to which they are justly and rightly entitled? And we wonder how much longer it will listen to the financial experts and their gratuitous but costly advice of raising loans in New Zealand? Their principal concern appears to be to keep up the present high rate of interest in New Zealand whereby the producers have to pay 2 per cent more for money than the Government could procure it in London.

We heartily agree with Professor Murphy that the present system of short dated mortgages is most unsatisfactory and that the cost is prohibitive. He suggests a mortgage bondsystem for private individual loans. An Association —or in other words a ‘‘Land Bank" —could be formed which would sell the bonds and lend the money so realised on mortgage just as the Public Trustee or any investment company did at present. The Professor maintains that such an as sociation would experience no trouble in raising money on the foreign market. As a matter of fact, nearly every country in the world has adopted similar schemes in order to produce finance for rural property at a reasonable rate of interest.