Canterbury Mortgage Trust yesterday froze redemptions on a NZ$250 million fund until March 2009,
The Press reported. About 5000 investors have funds in the Christchurch-based firm.
The trust was forced to make the decision after what it called "an unprecedented level" of withdrawal requests from investors worried about the general state of the finance market, trust spokesman Don McBeath told the newspaper.
The trust told the newspaper that the quarterly interest payment due on October 1 would still be made, but it was likely the return would be less than the nine per cent yield paid last quarter.
The trust, formed in 1999, has money invested in 300 mainly short-term first mortgages of residential, commercial and rural properties.
McBeath told the newspaper the trust's cash reserves, which were between five per cent and ten per cent of the value of the fund, would soon be insufficient to meet all the requests.
A couple of New Zealand's largest finance companies have opted to impose moratoriums on the withdrawal of investments in the last month, while more than 20 smaller financiers have failed over the last two years.