REDUCED INTEREST.

Star (Christchurch), Volume XLIV, Issue 456, 18 May 1932, Page 12

REDUCED INTEREST.

Working of the Adjustment Act. POINTS CLEARED UP. Many mortgagors, and many mortgagees for that matter, are uncertain of the way in which they will be affected by the provisions of the National Expenditure Adjustment Act. The Act provides that no one need pay more than 80 per cent of the interest which he was paying on January 1, 1930, a condition being that the reduction is not to bring the interest rate below 5 per cent. An instance would be that if a man were paying interest on £IOOO at 6 per cent, that is £6O, he would be entitled to have the interest reduced to £SO; 80 per cent of his original interest would amount to only £4B, but the 5 per cent provision makes £SO the minimum amount. The Act came into force on April 1 of this year, and is retrospective to that date. That means j that a mortgagor is entitled to claim a refund of any payment of over 80 per cent of the rate that has been paid since April 1. It has been asked whether or not the mortgagee has a right to foreclose if he can find a better investment. The answer is no. If the reduced rate is paid regularly he has no more right to foreclose than before the reduction was brought into force. There is nothing in the Act to prevent the lending of money on mortgages at a higher rate than 5 per cent. A city solicitor stated this morning that there was money available at 6 per cent, the ruling rate before the reduction, and that people were willing to pay 6 per cent for money still. Further, he stated that there were plenty of people willing to take 5 per cent for their money if the investment was sound from all aspects. The reduction is based solely on the rate applying on January 1, 1930. If there have been reductions since then they do not enter into the calculations at all. The same reduction applies to rents, and again the basis on which the reduction is founded is the rent on January 1, 1930.