CHANGED CONDITIONS

Taranaki Daily News, 18 October 1927, Page 13

CHANGED CONDITIONS

MORGAGES AND INVESTMENTS. NEEDS OF LOCAL BODIES. (From Our Own Correspondent.) Wellington, Oct. 13. While there are considerable complaints as to the long delay in obtaining loans from the Advances Department, in the private loan market sufficient money has been available for the purpose. At all events that is the opinion of Pyne, Gould, Guinness, Ltd., who refer to the matter in their annual review. They remark that the State Advances Office no doubt has to some extent supplied a want, but, except at the early part of the year, the demand for mortgage money upon good security has not been great. For most part mortgagees have already obtained on mortgage as much as, or more than, they are entitled to upon their land. Very few mortgagee have been repaid, but the main reason why the mortgage business has been dull for some time is that very little land has been changing hands. Where it has changed hands it has been very often at the instance of the mortgagee, in which ease the mortgagee has left the greater portion of hie money still upon mortgage on the property. And this state of things is likely to continue for some time longer. Even if the price of land comes down still further, investors in land will not become plentiful until those now on the land have made sufficient to justify them in launching out further. It is pointed out that during the past few years the amount borrowed by local bodies must have run into many millions. Previously much of this money came from outside, but now it is apparently furnished from the sources which previously supplied mortgage requirements. Had it not been for this borrowing it is possible that the interest on mortgage money might have been 19 per cent, lower. This view is probably correct. It is the more attractive character of local body loans that has curtailed the supply of mortgage money. Local body loans, except here and there, do not carry more than 5i per cent, interest, while on good safe mortgages 7 per cent, and even more is easily obtained, but with a mortgage there is the "grace” period of payment, and often notice has to be sent to the mortgagor to remind him that the interest is payable. With the bonds of local bodies there are no such delays or formalities. The interest is posted to the investor on due date, and there is no trouble whatever. Furthermore, since the slump of 1920-21, a good deal of mortgage money has “gone west,” and that has made investors feel rather shy of mortgage securities.

A good many investors do not like the bother associated with local body debentures, and such investors have found Stock Exchange securities to their liking. This accounts for the activity in bank shares, which yield, in

most cases, as high a return as do the bonds of local bodies, without any fuss or formalities in respect to the payment of dividends. Money, or loanable credit, is scarcer now than it was a year ago, and it is unsatisfactory to note that the people are not saving, at least not to the same extent as formerly.

The Government’s issue of bonds on behalf of the Rural Credits branch of the Advances Office has yet to be placed on the market, but any such issue is not likely to meet with much success just now, because the funds are not available.

Tho review, referring to the complaints of high taxation, high cost of living and high costs of production, contends that they are all due to the burden of our dead weight debt, to a heavy pension list and to an over-staffed and expensive Public Service. The Government itself is the hardest pressed of all. It knows well that the shoe of heavy taxation is pinching, but to retrench means the discharge of hundreds of civil servants, and the increase of unemployment, and the review adds: “Our real rulers, the Civil Service Departments, which look upon the public as sheep meant to be shorn, don’t want economy and do not practice it, and so the Government goes merrily on, borrowing, spending and taxing.” It is refreshing to find a joint stock company dealing with economy and political conditions in plain language, and, if others would follow suit, it would lead to improvement in our business and political life.