GROWING DEPOSITS

Otago Daily Times, Issue 22356, 1 September 1934, Page 28

GROWING DEPOSITS

POLICY OF THE BANKS FALLING MORTGAGE RATES. With the- huge excess of deposits, £22,391,000, shown by the June quarter’s banking returns, it is not surprising that the banks tend to keep an increasingly tight rein on acceptance of money on fixed deposit. Inquiries made in Auckland by a representative of the New Zealand Herald went to show that, while no sudden additional check has been placed on this class of business, the banks are doing all that they reasonably can to restrain the “snowballing” of deposits which they cannot profitably use. It was reported within the past few days that the authorities in charge of a State fund had endeavoured to place £20,000 on fixed deposit and had been unable to do so. While the rumour could not be confirmed, it was found to be regarded as not at all far fetched and indeed quite likely to be based on fact. The present policy of the banks seems to be to consider each application strictly on its merits, having regard to any amount the applicant may already have deposited, the urgency of the case and the amount and term of the deposit. A customer who has a current account and wishes to deposit a moderate sum, say £IOOO, need expect to find no difficulty raised by his bank, but no bank is willing at 'the present stage to go out of the way to oblige a firm which does not do business with it or which already has thousands of pounds on deposit. In other words, the banks_ are not prepared to be made a convenience of when they can expect no collateral advantage from a transaction. At the same time they are doing their best to meet the legitimate needs of their regular customers.

Concurrently with the tightening up of bank deposit business, there is a continued tendency for mortgage rates to fall, although the process remains gradual. Some weeks ago the Public Trust Office announced that it was prepared to advance on approved security at 44 per cent., and this rate has been adopted by the other Government lending departments. The normal rate for small and medium sized transactions, particularly for mortgages on house property, is 5 per cent. The Auckland Savings Bank, which specialises in mortgages on homes, has made 5 per cent, its standard. It is generally considered, however, that anyone wishing to raise a substantial sum on city property regarded as a sound coraraercity security may rely upon getting it at 44 per cent. Under exceptionally favourable circumstances the rate might be as low as 41 per cent. Rates on small mortgages are considered rather unlikely to fall to 4J per cent, under present conditions, because they are apt to be a troublesome form of 'investment, and some margin is needed to make them more attractive than, say, local body debentures, even on the current return yielded by the latter.