Mr. McLEAN (Melfort):
I think my hon. friend will admit that there are people whose affairs were reviewed under that act and who are going on as they were previously. They have never been declared bankrupt and they are not going to be declared bankrupt unless some change is made in the law. That affected many more than those who passed through farmers' creditors arrangement proceedings. We were told by my hon. friend that the farmers in the west are likely to be deprived in the future of any hope of obtaining money on mortgages under such a universal lending system. Unfortunately that
*Air. M. McLean.]
is the position in which they now find themselves. Compulsory restrictive measures have been in effect. I am not saying that they were not necessary at one time; I am not criticizing an}' government or administration for passing such legislation, but the effect is that many farmers are not now able to get any new money. In order that the farmers may adequately finance their operations, in order that young men may be able to start out for themselves and improve their positions, it is important that new money should be available.
There was one other objection raised by my hon. friend to which I should like to refer. He said that the farmer or home owner who has not been able to pay six to eight per cent interest:
-could not hope to meet the interest and principal payments of his newly adjusted loan at the rate of ten per cent per annum, which rate, or something near it, would necessarily apply during the earlier years. That would be five per cent for interest and five per cent for amortization of principal.
I would point out to my hon. friend that
the amortization rate on a twenty year mortgage at five per cent in equal annual payments would amount to 8'03 per cent. The man who is paying from six to eight per cent-we will take the larger rate because that has been the one most generally charged -on a mortgage running twenty years, with the principle due at the end of the term, would still have all of the principal outstanding against him; he would have paid only the interest. If that mortgage were revalued down to eighty per cent and the interest reduced to five per cent, with 3-03 per cent for principal, a total rate of 8-03 per cent on eighty per cent of the value would bring the interest and principal payments down to 6-64 per cent. At the end of twenty years not only would he have paid a lower total rate annually, but the principal would have evaporated along with the interest.
I am not criticizing my hon. friend; I am glad that he brought up this point so that it can be dealt with. The annual payments of interest and principal to be made under a mortgage covered by this legislation will be less than the previous interest payments used to be. We have been striving for a great many years for the adoption of this principle. We believe that in the past many mortgages might have been paid off several times over if the amortization principle had been adopted. But only interest payments, and high ones, were required, and at the end of the term the principal still remained.
For these reasons, and many others I have not mentioned, I hope that this measure passes
Central Mortgage Bank
second reading and is sent to the committee to which it is to be referred. Its principles have been understood for a long time; they are quite simple and few in number.
Topic: PROVISION FOR INCORPORATION, PURCHASE OF SHARES, ETC.-CONTINUATION OF DEBATE ON MOTION FOR SECOND READING