LOANS MARKET

Timaru Herald, Volume CXLII, Issue 20513, 3 September 1936, Page 8

LOANS MARKET

IMPASSE APPROACHING By Telegraph Press Association AUCKLAND, September 2. An impasse in the local body loans market is being approached as lending institutions are disinclined to take up loans at 3 s per cent, which is the maximum rate of interest allowed by the Local Government Loans Boa. .1. Practically all lending firms, principally life insurance offices, are rejecting loans at that rate of interest as th_y do not want to tie up money for any number of years while interest rates may harden. They prefer to look for other investments or to buy Government securities which are showing x higher return. There is a further reason in one case at least, the Auckland Savings Bank. Since 1933 savings banks have been forced to pay income tax. Last year the Auckland Savings Bank paid £16,000 in income tax, and the recent increase in -h ? rate will bring its annual payment to about £20,000. For this reason the bank has withdrawn an offer to lend £25,000 at 3i per cent to the Thames Valley Power Board. Previously there had been correspondence between the two parties regarding the term of the loan, the bank being averse to a longdated loan. Recently the bank took up a loan of £377,000 for 24 years at 3i per cent from tl e Auckland City Council. How ever, in this instance, an arrangement to repay principal and interest halfyearly was reached. The bank is thus getting the principal back during the currency of the loan, and can re-invest it if more profitable outlets are shown It is the Government’s purpose to keep interest rates low. however. Although there are ample funds for investment, lending institutions are not likely ? enter the local body market without some relaxation of the Loans Board’s terms.