Terminal Annuities;

Or a system of payments somewhat higher than the interest agreed upon, and continued for a definite number of years, from 10 to 25, according to the amount of principal paid off yearly, would in the long run be the cheapest policy that the farmer could adopt. You probably noticed that Sir Julius Vogel, at his Ash burton meeting, was asked if a farmer would be able to free his farm in 25 years, supposing him to be able to raise money at 5 per cent, and to pay annually the sum of £7 1s 11d. Now, although this question in several simple forms has been put at other election meetings, Sir Julius was the only politician to give a really honest and favourable reply; he considered that the subject of terminal annuities (as implied by the question) should engage the attention of farmers, more especially if the interest they were at present paying could be used to discharge the debt incurred while performing its present office; which means that it would be a grand thing for the farmer if, after paying his present rate of interest for 25 years, he could call his land entirely his own, and not, as at present, be no nearer freeing his property, when his mortgage expires, than he was when he signed the deed. A scheme which enables the borrower to pay off annually a portion of the principal every time he makes a payment of interest should have peculiar attractions for Colonial farmers, as the strong point of the system is that he is credited with the amount of principal he pays annually, and ceases to be charged interest except on the principal actually owing at the beginning! of a fresh financial year. So that each payment adds fresh inducements to the continuance and completion of a transaction, having for its object the freedom of the land from debt within a given period.

I have thought the subject of terminal annuities so important, that I have made series of rather tedious calculations, which you can verify for yourselves.

Now 5 per cent per annum is a popular rate, and one more easily worked than some others, and on the supposition that a man borrows £100 at 5 per cent, he will clear off all his liability in a time that varies according to the amount of the payments made.

At 4½ per cent, paying £7 10s per annum—20yrs.

At 4 per cent, paying £8 per annum—15½yrs.

At 4½ per cent, paying, per annum—16yrs, and 9s 8½d owing.

At 4½ per cent—paying 5 per cent first year, with ½ per cent increase annually till the debt is wiped off in 17 years, paying last year 13 per cent—he will owe less than £1 10s. for every £100 borrowed.

Now, I will try to make the advantages of the system clear to all of you. Property is mortgaged in New Zealand to the extent of £30,016,461, slightly over a half being foreign capital. If we estimate the average rate of interest at 8½ per cent per annum, which I own is high enough, we find that in 25 years, and without in any way reducing the debt, a total amount of £63,785,000 is, in round numbers, paid as interest on mortgage. But by paying off principal and interest in the same period, supposing the interest to be 5 per cent, the payments come to something like £53,248,000. I think that this will make apparent that the Terminal Annuities system, on the above basis, will give the farmer free land, besides saving the Colony about £10,537,000 in a quarter of a century, or over £421,000 each year. As you are probably aware, the above statement was contained in the Lyttelton Times of July 7, and I have not noticed any published attempt to undermine it.

Gentlemen, if I were to speak upon this subject for another hour, I could not do more than express my conviction that the remedy for present ills lies mainly in the hands of farmers themselves.

I now beg to move, Sir—"That a Committee, composed of Messrs Bruce, Parsons, Vucetich, Lambie, Rule, Strachan, and the mover, with power to add to their number, be appointed to examine into the merits of the scheme made public by Mr Newlyn, for the reduction of the rates of mortgage interest."

Seconded by Mr Parsons, and carried.

Proposed by Mr Newlyn, and seconded by Mr Mangham, junr., and earned—"That the Committee just appointed be requested to call a meeting within one month, and at such place as may be found convenient, to report progress."