THE MONEY MARKET.
RISE IN BANK-RATE. EFFECT UPON 5 MORTGAGES. I ' A question of importance in the financial world at the moment is whether the riso in the bank-rate will bo followed by a riso in the rato of interest upon mortgages. Tho rato is practically controlled by such lending institutions as tho Auckland Savings Bank and insurance companies. At present it is 6 per cent., but tho condition usually is that the security must show a margin of 50 per cent. In tho case of tho Savings Bank, at least, tho interest-ralo after the first year, may bo adjusted quarterly and therefore many householders and farijiers who have 'borrowed from that institution are waiting for a decision and hoping for tho best. As far as private lending on broad acres is concerned the trend still is away from that class of investment. To quoto a legal authority, the private lender is inclined to leave this field fo the State and to tile institutions which have the organisation for frequent inspections. A farmer may pay his interest' promptly and regularly," he said, "but when a renewal of tho mortgage is wanted it may bo found that tho value of tho security has dropped through neglect or other causes. Sometimes the private lender may be attracted by a high rate of interest, but this t'siially implies a greater margin of risk than the institutions will countenance. On tho whole the paramount dosiro is for safety, henco the demand foi gilt-edged and semi-gilt-edged securities. "The standard mortgage interest may not tfo tip/' said this authority, hut it is obvious that tho effect of tho riso in the bank-rate will' harden rates generally. lb i» tho old law of supply and demand."
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New Zealand Herald, Volume LXVII, Issue 20481, 5 February 1930, Page 12
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289THE MONEY MARKET. New Zealand Herald, Volume LXVII, Issue 20481, 5 February 1930, Page 12
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