RATE OF INTEREST

Nelson Evening Mail, Volume LVI, 16 June 1923, Page 3

RATE OF INTEREST

RANK CHAIRMAN’S REMARKS Referring to “rate of interest” at the annual meeting of the. Bank of New Zealand at Wellington yesterday, the chairman of Directors (Sir George Elliot) said : The in illinium rate of interest on Ba nk advances in the Dominion was reduced to 62 per cent, on 3rd January last. The reduction of Income Tax last year, and the promise of a further reduction shortly, enabled us to reduce the rate on a great many overdrafts. Although per cent, is the quoted “minimum” rate, we do not average that on the whole of our advances in New Zealand. Hard times disclose unsuspected weaknesses in ine financial condition of many customers; so much so that., in some cases, we have found it necessary for the time being to forego interest, in others to make substantial concessions, the result being that the average rate of interest earned by our advances in New Zealand lias been adversely affected. There is little prooituuity of any further reduction in our advance rates while our overhead expenses remain so abnormally heavy. It is still difficult to borrow 011 fixed mortgage even 011 a 50 per cent, margin, at less than 61 per cent., hones it must be recognised that our borrowing customers have little to complain of sitiee they have the advantage of paying on their daily balances only and not on the sum we engage to lend them.

Comparison is sometimes made between lending rates here and those ml- 1 ing in London, but such comparison is absurd, conditions being entirely differ- j ent. Australian rates certainly bear aj close relation to ours, although Banks in ; New Zealand are subject, to a much high- i er Income Tax than they are in Austin- . lia. ' ( 111 comparing Bank rates with those ’ charged by private lenders and Govern- : ment lending institutions, the services; rendered by the Banks in conducting ac- ! counts are invariably overlooked; if the public want facilities, they must pay for , them. /

The rate of interest on Mortgages under the Moratorium, which expires next year, is fixed under the Act at 61, per cent. It lias been suggested that the rate may fall when the Act- expires, but unless there is also a decided fall in Australian rales this is unlikely to happen, for mortgage rates, like the overdraft rate in New Zealand, arc to a large extent governed by those ruling in Australia. Undue pressure on large lending institutions here to reduce the rate of interest would have the effect of driving money to Australia for investment. The fact mast not be overlooked that a reduction in the lending rate is sooner or later followed hv a reduction in the deposit rate, and those people who are so insistent that the lending rate should he reduced shculd not forget the 700.QU0 depositors in the Post Office and Trus-| tecs' Savings Banks —the thrifty frugal I people of small or moderate means—who I would jsuffer from reduction in interest j rates. ' I In addition to the deposits of about £4d.1)00,003 held by the Post Office and Trustees' Savings Banks, the Joint Stock 1 Banks also hold interest-bearing deposits] to the amount of about £17,000,000. The claims of the fixed depositors to' receive a reasonable rate of interest, must have the sympathetic consideration of the Banks: and, as any further reduction of the lending rates would necessitate a lowering of the interest allowed on Fixed Deposits, it will he readily understood that the Banks are not disposed, for the present at any rate, to make any alteration.