INTEREST REDUCTIONS

New Zealand Herald, Volume LXIX, Issue 21253, 5 August 1932, Page 13

INTEREST REDUCTIONS

LIFE POLICY MORTGAGES INTENTIONS OF GOVERNMENT New legislation proposed [by TELEGRAPH —OWN correspondent] WELLINGTON, Thursday The application of the recent interestreducing legislation to mortgages of life insurance policies, regarding which there has boon some misunderstanding, was referred to by the Prime Minister, lit. Hon. G. W. Forbes, to-day. In tho terms of the National Expenditure Adjustment Act, said Mr. Forbes, tliG interest on all mortgages to which tho Act applied was reducible by 20 per 'cent, but it was provided that the net rate of interest payablo under a mortgage of chattels should not bo reduced below 6£ per cent, and the net rate payable under any other mortgage, below 5 per cent. "A mortgage of a life policy is a mortgage under tho Act," continued tho Prime Minister, "but it is reported that certain insurance companies are treating the mortgages of their policies as mortgages of chattels, with tho result that such companies have declined to reduce the rate of interest payable on loans secured on policies below 6£ per cent. Complaints have been made to the Government by policyholders regarding tho action of such companies." Mr. Forbes stated that it was not the intention of the Government, when the legislation was passed, that life policies should be treated as chattels, the higher minimum rate of chattel mortgages being intended to apply only to mortgages of such things as stock, furniture and other tangible articles. While not agreeing with the legal interpretation placed on the Act by the companies in question, the Government realised it would be unfair to leave it to individual policy-holders to challenge in tho Courts the action taken by the companies, said Mr. Forbes, and, it was proposed at the forthcoming session to introduce legislation declaring that the word chattels as used in tho Act did not include, and had never included, a life policy.