WRITING DOWN MORTGAGES

Taranaki Daily News, 29 January 1931, Page 3

WRITING DOWN MORTGAGES

LONG VIEW ADVISABLE. , ' DISCUSSION OF RISKS. Speaking from the bench of the Ped" eral Arbitration Court in Melbourne, Chief Judge Dethridge recently confessed that the problem of mortgages - and interest was troubling him. It seemed, he said, that mortgagees and others, owing to falling values, would have te be satisfied with, a 50 per cent, decrease in their investments. Discussing the question, “Should mbrt•gages be written down?” the Wild';Ciit Monthly, a noted financial journal published in Sydney, states:— “Now the man who has been paying' 5 per cent, for money will only get it for 5 per cent, as long as he can show that there is practically no risk'in lending to him. As soon as he shows-that there are risks, up go the rates. So we shall have to be careful, for if firstclass mortgages, etc., are shown to be dangerous things to handle—liable to a writing-down of 50 per cent., then there will be no cheap money for even firstclass mortgages and the like in future. A further question is whether reduction or writing-down is honest. ,‘We ought to be sheltefed,’‘these investors: may*plead in effect. ‘We deserve shelter., it is true that we are getting our 5 or 6 per cent, interest unimpaired, while , other, sorts of investments are getting nothing at all; but, remember that we got only 5 or 6 per cent, when others ’ were 'getting 10 per-cent. < ,J . ; . “And that is quite true, also. But there is another point to consider: Were they wise to accept 5 or 6 per cent? Did they not. overlook dangers- which in-faet existed, and is it not their fault 'that they did not demand a higher rate of.interest in order to provide for those risks? This is almost exactly what the French say in reply -to the complaint that they paid off the Allies with depreciated paper, involving a loss ,of about threefourths of the money. ‘That js quite true,’ the French say. ‘You speculated in francs. Had. they recovered to part you would have made about. 35 to 40 .per cent.; they-fell, and you lost about'6s per cent. Thqre was a risk,, which-you should have provided for.’ “There was a risk wMch it may be that Australian mortgagees and investors in Australian public stocks ought to have provided for-also. It is a point which we have already said we may. yet have to put before our. creditors. Further, we. borrowed when the pound, was worth much less than it is to-day; some of it we borrowed when one - bushel of wheat would payfnterest or repay,principal that three bushels will not- pay to-day. There is a case, then, for readjustment, but if we apply for-readjust-ment we shall have to remember that it will stop us from getting cheap money for similar investments in future—until at any rate, all the circumstances of : the case are forgotten.”