In it for the long term

Archive records tell us more than just the facts and figures of history, often they can provide insight into the mood of the time.

Records from 1926 document a sense of caution and concern. New Zealand's primary industries had endured an unprofitable year with poor weather conditions, over valued land and labour strikes in Britain all playing a part.

One report added that many of those in difficulty were 'returned soldiers who certainly deserve a better fate'.

An idea for loans that allowed payment of the principal and interest over an extended time period was becoming popular. At BNZ, the question of creating a long-term lending department was under careful consideration. 

Since the 1890s, serious lending had been mainly undertaken by the Government Advances to Settlers Department with loans amounting to £30 million over 60,000 borrowers. Meanwhile, half of all of lending by BNZ was made out for amounts of £300 or less. Only 30% of lending went to rural properties.

The development of long term lending at the bank aimed to support 'pastoralists and agriculturalists'. Personal mortgages would remain the business of the government until well into the 1960s.  

Details on how the loans should be managed were thoroughly discussed and included in a proposal to Parliament. The resulting 'Bank of New Zealand Act 1926' was passed soon after.

An interest rate was set at 6% with loans permitted to extend no more than 36 and a 1/2 years. Although initial demand was lower than expected, business grew steadily over the years.

The December Half Yearly Report for 1926, proudly noted the establishment of this department by 'an ordinary Joint Stock Bank' as a world first.