STATE ADVANCES

Otago Daily Times, Issue 23118, 18 February 1937, Page 8

STATE ADVANCES

As the issue by the State Advances Corporation of stock or debentures, of which public notice has now been given, will be guaranteed by the Government it will rank as giltedged. The Prime Minister, in the absence of the Minister of Finance, has explained that the necessity for the possession by the Corporation of additional funds is due to the fact that there has been a continuous demand for advances since the latter part of 1935. This explanation dates the new era of mortgage finance, of which Mr Savage has spoken, as one that began after the establishment of the Mortgage Corporation of New Zealand at the instance of the Coalition Government. The system of the long-term table mortgage, which ujjyis then introduced; has apparently commended itself, as it was expected it would do, to persons who desired advances either for the purpose of refinancing on their securities, whether rural or urban, or of undertaking the erection of new buildings. Mr Savage states that the total value of loans sanctioned up to the close of last year was about £ 6,000,000. It may be assumed that this figure includes the advances made by the Mortgage Corporation of New Zealand prior to the dissolution of that body and the transference of its activities and responsibilites to the State Advances Corporation. Even on this assumption, however, the evidence is provided of a sharp impetus having been given to borrowing in this “new era of mortgage finance.” It is necessary only to mention the fact that in the forty-one years from the inception of the State Advances to Settlers Department in 1894 to March 31, 1935, the total amount lent by it to settlers, workers, and local authorities was £75,878,208, or less than an average of £1,750,000 a year, in order that it may be seen that advances have recently been made on an extensive scale. The fact that there is, as Mr Savage says, a' steady flow of applicants for finance is reflected in the intimation that the State Advances Corporation will accept all the money that is offered to it on the terms of a seven years' currency at 3J per cent. This must be taken to mean that it will dispose of stock and debentures, which will be procurable “ over the counter,” until it has received funds sufficient, in its judgment, to meet its present and prospective requirements. The price which it is proposed to pay for funds may not be entirely attractive, since wellinformed opinion, supported by recent transactions in Australia, holds that money is tightening and that higher rates may be anticipated. It may be considered, however, that the term of the State Advances . Corporation’s loan is sufficiently short to outweigh any disadvantages which the interest that is payable on it may have in the eyes of investors.