The United States should do more to help taxpayers increase their personal savings and investment, says William S. Mortensen, president of the National Savings and Loan League, a Washington, D.C.-based trade organization. Inflation and higher taxes are eating away the percentage of funds available for savings, he notes. The nation's personal-savings rate slipped to about 4 percent in 1979 and has been in the 4-to-6-percent range for the past four years. In mid-1975, however, it was almost 10 percent. This compares with Japanese savings of about 25 percent of disposable income.
Proposals pending in Congress call for exclusion of some interest income from federal taxes. If passed, though, these would probably allow exemptions of only
Mr. Mortensen, who is also president of First Federal Savings and Loan Association of Santa Monica, Calif., feels more encouragement to savers, through tax incentives, would do much to curb inflation.
"If savers had a much better tax treatment, then it takes a lower rate of interest to attract them to savings," he says. "That in itself is a reduction in inflation, and I think it would help to reduce inflation all the way through the system.
"The economic climate of this country has deteriorated materially, and it's very clear that if we're going to be a strong nation, we've got to have a strong economy, and the only way we're going to have a strong economy is to have a healthy savings and investment climate -- which we've not had for some time."
With high inflation, he continues, "the saver wants to have a close-to-market yield on savings. Yet if the financial institutions providing money for housing are going to do that, they've got to be able to adjust their loan interest charges accordingly." As savings rates move up dramatically at the time of inflation, he adds, then so must mortgage rates.
Mr. Mortensen sees the traditional conventional mortgage becoming a collector's item, replaced by what he likes to call "a new generation of mortgages for a new generation of home buyers."
These include: variable-rate mortgages, already in wide use in California, in which interest rates rise or fall, tied to an economic index; rollover mortgages , in which rates are renegotiated periodically, a method already popular in Canada; graduated-payment mortgages, designed mainly for younger home buyers who expect their incomes to grow; and a various of this: flexible loan insurance program mortgages, in which all or part of the down payment is kept in an interest-bearing escrow account from which funds are withdrawn monthly during the early years of a mortgage and added to the monthly payment.
"The most significant new mortgage of the future," Mr. Mortensen says, is the reverse annuity, in which a home's equity buildup is used as the basis for monthly payments from the financial institution to the homeowner. "With the nation developing many elderly, retired people, I expect the reverse-annuity mortgage to become one of the most popular forms of financing by the end of the 1980s," he predicts.
Meanwhile, there is not much hope for considerably lower mortgage interest rates in the next decade, he indicates. The lowest rate he envisions is 10 percent, because "there is too high a cost of savings now entrenched in the system."