LONG-TERM MORTGAGES.

New Zealand Herald, Volume LXVI, Issue 20242, 30 April 1929, Page 10

LONG-TERM MORTGAGES.

According to the latest return issued by the Bank of New Zealand, the operations of its special mortgage department had almost reached the limit of the initial capital fund. The latter is £703,125, representing half the authorised preference share capital, while the average amount of loans outstanding during the March quarter was £659,085. As the increase in the last year has averaged about £90,000 a quarter, further expansion must be conditional upon the furnishing of supplementary resources. These may be provided, under the authority of the legislation, by debenture issues up to three times the paid-up capital, so that over £2,000,000 could be placed at the disposal of the mortgage department before resort need be made to a further issue of shares. The present position, therefore, merely marks the completion of the first stage in an experiment that was not only welcomed in New Zealand but also attracted notice abroad. It was a striking innovation for a commercial bank to undertake investments over a period of 36J- years, but while its prospects of useful service were presented with some reservations, it can scarcely have been anticipated that in 2',- years the amount advanced would still be within the first quota of capital. Indeed, at last year's meeting of the bank's shareholders, the chairman remarked that the amount advanced had not been as large as was anticipated and invited suitable applications for the large amount that the bank was in a position to lend. Sir George Elliot, however, added a warning that there was not the slightest intention to undertake risky business, since loans at the low rate of interest must be reserved for firstclass securities. The administration of the scheme has naturally been prudent, and the bank, in accordance with its traditions, may even have been more conservative than other institutions operating in the same field. Nevertheless, the fact remains that though in 192(5 the bank asked for authority to raise as much as £5,625,000 of capital, it is only now necessary to make the first issue of debentures. The inference would appear to be either that the bank over-estimated the scope of investment on satisfactory security or that the actual demand for accommodation on favourable terms has not been large. Its operations in this department throughout the Dominion during the last two years should have equipped the bank with exceptionally reliable information regarding the financial position and needs of the farming community and the public will await with interest an official presentation of the directors' conclusions on the subject,)