Cheaper Money

Sun (Auckland), Volume II, Issue 530, 6 December 1928, Page 8

Cheaper Money

Better Times Bring Lower Rate

ONE of the most significant proofs of the approach of better times for New Zealand in general, and Auckland in particular, is the decision of the Auckland Savings Bank to reduce the interest rate on mortgages from 61- per cent, to 6 per cent. This, it is expected, will herald a general reduction in the mortgage rate. The investment market is flush with money, and the ‘fast returning confidence of the public will assist in diverting it into profitable channels.

'J'HE pincli of economy -which -was felt by the people during and after the industrial slump, and which was reflected with much hardship upon the insecure retailer, has in some respects been a blessing in disguise, for the financial position of the small investor throughout the Dominion has been consolidated with increasing certainty. Now the market is flush with money for investment. Many times lately it has been suggested that the interest rate upon mortgages should be reduced, for it was recognised that here lay to some

extent the key to the country’s financial elasticity. But it remained for the Auckland Savings Bank to take the first step toward this reduction, and yesterday a series of resolutions was passed by the trustees, reducing the mortgage interest from 6i to 6 per cent., this figure to be chargeable on all current and overdue mortgages as from January 1, 1929. Although the heads of several financial and Investment concerns in the city are reluctant to accept this as the forerunner of a general reduction of one-half per cent, on mortgage rates, Mr. T. N. Smallwood, accountant at the Auckland Savings Bank, believes that others must emulate the example set by his concern, and he anticipates that before long the whole Dominion will enjoy the privilege of securing money at 6 per cent. The investing public is always sensitive in its reaction to any fluctuation in security. At one time it was

an easy thing for ruqnqy to be secured upon rural holdings, but the slump has taught the investor that country securities are as much a business proposition as suburban shops or city enterprise, and the market in this direction has been tight during the past couple of years. A loosening tendency has been shown lately. SMALL MAN ENCOURAGED Comment was ventured by financial men in Auckland upon the decision of the Savings Bank to reduce the interest rate payable to depositors from 4j per cent, to 4J per cent. Mr. Smallwood meets this with the explanation that the alteration will not affect the small investor to any material extent. but it will tend to discourage the operation of many big firms who make a convenience of the institution while waiting for a suitable vehicle for their liquid cash. This class of business was an unhealthy one for the Savings Bank, because of the large volume of liquid money required on hand, and the reduction of the deposit rate of onequarter per cent, would divert a certain amount of it into other concerns. The policy of the bank, Mr. Smallwood explained, always had been to encourage thrift among the small depositors. This would not be jeopardised now, because the average small account would he affected by approximately only ninepence a year by the reduced interest rate. “The depositor whom we find the best, and whom we encourage, is he who puts into the bank his 10s or £1 every week,” Mr. Smallwood added, "and this is the class of investor we are aiming to assist throughout our operations.” PROGRESS—WITH CAUTION Surprise was expressed in some business quarters in Auckland that the mortgage rate had fallen. Others regarded it as the inevitable indication of the era of prosperity which is already in sight. “It seems to me that mortgagees will have to bring down their rates of interest if they are wanting good securities,” one man said. “Particularly will the rate on first-class securities have to fall.” Caution, lest there be another period of inflation, was urged by another business man. “The fact that interest is falling shows that there is a demand for first-class shares producing a high rate,” he said. "Things are much more solid than they have been, and I believe that we are round the corner, though it is not yet time for lavish expenditure.” Retailers and the general public, as well as the big financiers, are feeling the elasticity of the money market, and in view of what has been accomplished previously, and of what is now indicated, New Zealand is enabled to view with pride a past of splendid accomplishment and to look forward with confidence to a future of unprecedented promise.