LOANS ON MORTGAGE

New Zealand Herald, Volume LXXI, Issue 21844, 5 July 1934, Page 14

LOANS ON MORTGAGE

LOWER INTEREST RATES SAFETY OF CAPITAL SOUGHT OFFER BY TRUSTEE COMPANIES The surplus of capital seeking investment in New Zealand lias made it increasingly difficult for trustees to find suitable outlets for tlio funds at their disposal. Under existing conditions, it was inevitable that tlio safe "authorised securities" of trustees should have been among the first forced to higher levels by investors. Trustees have now turned their attention to tho mortgage market with a view to making full use of what limited scope this avenue offers. Obviously, there is little opportunity for new business, but a rearrangement of existing first mortgages is possible. Capital is being offered at? interest rates as low as per cent, the main question being not tho return, but tho safety of the principal. This indicates that security is still the dominant factor in investment, governing tho 'amount of now capital attracted to mortgages. The Public Trustee has advised solicitors that money is available for investment on first mortgage on suitable properties for a term not exceeding five years, with interest at 4$ per cent. Tho circular of one of the private trustee companies reads: "It will bo recognised that pending a return to confidence in the Dominion, a demand is lacking for new advances for development purposes. However, there arc many cases where it would bo of considerable benefit to mortgagors to rearrange their finance and secure tho advantage of lower interest rates. In lending on town business securities, wo naturally requiro them to bo situated in progressive localities atid to bo the home of successful businesses. Residential properties in good districts also will be welcomed, but it must be recognised that the property entailing heavy outgoings is not attractive today. In short, the test is the saleability or letting prospects of such securities.

"As far as country properties are concerned, we require them to be in good districts, mainly improved with suitable buildings, and would prefer to limit the advance to, say, £2300. Any loans granted would .be subject to valuation and for a term of three or five years, or even longer, with halfyearly principal reductions if possible. Interest would be at 5 per cent or even slightly less in the case of securities showing a specially wide margin, our main concern being safety of principal, not high interest rates. "Where loans have been granted and havo been found to be satisfactory> mortgagors generally can rest assured that there will be no difficulty in granting renowals on the maturity date of such mortgages, providing the properties have been properly maintained."