The following extracts, relating to the House Purchase Department, have been extracted from the Bank Committee Reports to the City Council as indicated:

 

 

During the year advances have been made to 300 depositors for the purchase of their houses, bringing the total number of borrowers from the Bank up to 1,264. In 142 cases the borrowers have discharged their indebtedness to the Bank, leaving the number of mortgagors at the 31st March, 1922, at 1,122.

 

The sum advanced during the year in respect of House Purchase was £85,365, bringing the total amount of the advances made since the opening of the Bank to £349,453, and the amount repayable at the end of the year to £261,619 1s. 4d.

 

As illustrative of the character of the assistance which the House Purchase Department of the Bank has rendered to the depositors, the following information is submitted:

 

No. of cases where the advance:
  - did not exceed £100 …….…..….. 64
  - £100 to £200 …………….….…. 487
  - £200 to £300 ………….….….… 314
  - £300 to £400 …………….…….. 204
  - £400 to £500 ……………….…… 81
  - £500 to £750 ………..…….…… 104
  - £750 to £1,000 …………....……… 9
  - over £1,000 ………………..……… 1
Giving an average advance of £276.

 

It has been necessary to exercise the Bank's power to obtain possession of property in two cases. In one case the property has been sold by auction and the full amount of the mortgage recovered, while in the other a Receiver has been appointed and the rents are being collected.

 

The repayment of principal and interest by the borrowers is satisfactory, although it was found necessary to suspend or modify the repayments in a few cases where the circumstances existing justified such action.

 

 

The advantages which the Bank provides for depositors to buy their houses are appreciated, and during the past year 925 applications have been dealt with. Of these applications 765 were granted, and mortgages representing £189,147 were arranged.

 

Since the Bank opened in 1919 no less a sum than £633,395 has been advanced on mortgage to 2,130 depositors to enable them to purchase houses for their occupation; 472 of these borrowers have entirely paid off their mortgages.

 

At the end of the year 1,658 mortgages were in operation, representing an indebtedness of £401,970 14s. 11d., or an average of £242 8s. 10d. per borrower.

 

The following is an analysis of the outstanding loans:

 

No. of cases where the indebtedness:
  - does not exceed £100 …….…..….. 225
  - £100 to £200 ……………..….……. 532
  - £200 to £300 ……………….…...… 477
  - £300 to £400 …………………..….. 203
  - £400 to £500 ……………..…..…… 126
  - £500 to £1,000 ………….......……… 95
  - Total ……………………............… 1,658

 

The year has been marked by the purchase of Corporation houses through the Bank, 154 such purchases having been completed, and arrangements made for buying in 150 additional cases as the houses are completed and ready for habitation. The policy sanctioned by the Council of assisting people to acquire Corporation houses by grants of a higher figure than the Bank are able under their Rules to make has been brought into operation by the Finance Committee, the machinery of the Bank being used for the purpose.

 

Your Committee are pleased to report that in very few cases has it been necessary to take drastic measures against borrowers in arrear with repayments. Cases of hardship have been brought to the Committee's attention, and have been dealt with sympathetically by them.

 

During the year under review, the Committee felt it necessary to take possession in four cases, and appoint a Receiver in respect of the properties. Two of these were subsequently disposed of, and the outstanding balance due to the Bank recovered. At the end of March, 1923, a Receiver was acting in four cases, one of which has, during the past year, been satisfactorily dealt with. Consequently five cases were, at the end of March, 1924, in the Receiver's hands.

 

 

The following figures relate to loans made on Municipal houses:

Year ended March 31st	Number of Mortgages Arranged	Amount Advanced   £	Number of Mortgages in force at end of year	Amount Outstanding at end of year £-s-d
1924	158	41,595	154	39,532-2-2
1925	424	117,460	567	147,762-14-11
1926	800	263,463	1,322	380,565-17-6
1927	1,007	357,997	2,202	673,278-10-7
1928	261	89,877	2,272	663,872-17-1
	2,650	870,392

As the Council are aware, the Bank's liability in respect of loans on municipal houses only extends to 80 per cent. of the valuation obtained by the Bank, the Finance Committee guaranteeing the excess amount loaned under the low deposit scheme sanctioned by the Council. The extent of the Finance Committee's guarantee at the end of the financial year amounted to £152,887.

 

The monthly repayments under the terms of the mortgages have been maintained, on the whole, at a satisfactory level, although some difficulty was experienced during the year in respect of mortgages of municipal houses on the Pype Hayes Estate. As a result of the action taken by the Lord Mayor, and with the hearty co-operation of other Committees interested, this difficulty has been eased, and your Committee believe that the arrangements made with the individual mortgagors will result in giving general satisfaction. Cases of hardship arising from unemployment or serious illness have been dealt with sympathetically, and your Committee have permitted modified repayments to be made where the circumstances justified such a course. On the other hand, a few mortgagors have shown an inclination to ignore their obligations, and these have been dealt with in a firm manner. In cases where the Committee felt it necessary to take extreme measures, the whole of the amounts due have been recovered.

 

The practice instituted some years ago of converting progressive mortgages into Bank mortgages has been continued during the year. These applications are approved by the Public Works and Town Planning Committee, and progressive advances made by the Finance Committee. The repayment of the advance is dealt with by the Bank, acting as agent for the Finance Committee. During the year 18 progressive mortgages were discharged and Bank mortgages created, and at the end of the financial year 10 progressive mortgages were being dealt with by the Bank.

 

 

The difficulty in connection with certain houses on the Pype Hayes Estate, to which reference was made in the last annual report, has been overcome; the mortgagors being dealt with in accordance with the directions of the City Council.

 

 

The liability of the Bank in respect of loans on municipal houses extends to 80 per cent. of the valuation, the balance of the loan being found by the Bank on the guarantee of the Finance Committee in accordance with the scheme for sale of houses adopted by the Council. The extent of the liability of the Finance Committee at the end of the financial year amounted to £160,051, but up to the present in no case has it been necessary to take advantage of the guarantee.

 

The monthly repayments under the scheme of the mortgages have again been maintained at a satisfactory level, and only in a few cases has it been necessary to take firm measures in order to recover the amounts due.

 

The number of advances on municipal houses is restricted by the percentages of houses for sale fixed by the Council, viz., 33.33 per cent. in the case of parlour type and 10 per cent. in the case of non-parlour type, although your Committee are in a position to meet additional applications.

 

During the year 8 Progressive Mortgages arranged by the Public Works and Town Planning Committee have been converted into Bank Mortgages; and at the end of the year the Bank was acting for the Finance Committee in the collection of repayments in respect of 30 Progressive Mortgages.

 

 

To enable the Bank to deal with applications in respect of new houses on estates in course of development, where the builder or those responsible are selling houses at fixed purchase prices with fixed deposits, your Committee have adopted a scheme whereby exceptional advances may be made up to 90 per cent. of the purchase price of the house, and that the builder or person responsible for the sale of such houses shall deposit satisfactory collateral security to cover the difference between the normal amount which the Bank would lend based on valuation and the amount of the exceptional advance.

 

The maximum term of years for which loans may be granted has also been increased from 20 to 25 years.

 

To meet the circumstances of those who prefer a fixed monthly payment of interest and principal, your Committee are prepared to make arrangements accordingly, as an alternative to the usual method of repayment, which is based on a fixed monthly instalment of principal with a reducing monthly interest charge.

 

Advances in respect of houses which do not form part of an estate development will continue to be made on the usual basis, which admits of loans representing up to 90 per cent. of the valuation in approved cases, and the facility for extended loan period and equated payments will also be applicable thereto.

 

Applicants desiring to combine house purchase with life or endowment assurance may do so by adopting one of several schemes which have been arranged in conjunction with leading Assurance Companies.

 

[Loans on Municipal Houses at March 31st 1934: 4,113 mortgages arranged, £1,340,917 advanced.]

 

 

During the year, 713 mortgages were arranged and 813 paid off, leaving in force 6,432 mortgages representing an indebtedness of £1,535,305 5s. 9d., or an average of £238 14s. 0d. per borrower.

 

The repayment transactions totalled 73,768, and in this connection it is gratifying to report again that the borrowers have satisfactorily maintained their regular payments. In a few instances it has been necessary for your Committee to exert pressure to obtain the amounts due, and the steps taken have been sufficient to prevent the Bank suffering any loss.

 

Borrowers have the choice of making their repayments by two methods, viz.: (1) by a fixed monthly instalment of principal, with a reducing monthly interest charge based on the amount of principal repaid, or (2) by a fixed amount representing both principal and interest; and it is interesting to find that, despite the publicity given to the second method by builders and building societies, only 47 persons have elected to make their repayments to the Bank by that means. The majority of borrowers appreciate that the first method referred to above confers advantages which do not accrue to mortgages effected on the equated payment basis. In addition to the above methods of making repayments, your Committee have made arrangements whereby house purchase may be combined with Life or Endowment Assurance, and there is evidence that interest is now being taken in these arrangements.

 

In February last your Committee came to the conclusion that a reduction in the rate of interest charged might prudently be made, and accordingly it was decided to reduce the rate from 5% to 4½% per annum, a step which proved to be in step with public opinion, and one which has since been followed by other lending organisations. In reaching such a decision, your Committee did not overlook the claims of existing borrowers to consideration in this matter, and a scheme was devised whereby an allowance equal to the reduction of half per cent. could be made at the end of December each year, providing the account had not been in arrear. This decision has given general satisfaction to the mortgagor, many of whom have expressed their appreciation of your Committee's actions.

 

The competition for house purchase business has greatly increased, owing to building societies from all over the country operating in Birmingham and adjoining districts through agencies, or by establishing a local office. Many of these societies have arranged schemes with builders and agents for the sale of houses on low deposit terms. While the Bank, as a public institution, cannot take undue risks, your Committee have, nevertheless, considered it desirable to get in touch with builders and make known the terms and conditions under which schemes can be arranged. As a result, many builders are now co-operating with the Bank.

 

The Committee will continue to give careful consideration to all applications, whether from builders or purchasers.

 

 

During the year your Committee have felt it desirable to revise the terms and conditions under which advances would normally be made, particularly so far as the same affected builders and others developing housing estates. The Building Societies Association also found it necessary to prepare a 'Code of Ethics,' to which it was expected societies in general would subscribe. Your Committee have reason to believe that the majority of building societies have adjusted their arrangements so as to fall in line with this 'Code of Ethics,' but some societies are taking an independent course. The present terms and conditions governing advances by the Bank are reasonably comparable with the 'Code of Ethics.' The difference in the quality of houses being erected is very marked, and it is essential that your Committee should act with discretion in determining any application. To those who are erecting houses of a high standard the new terms and conditions have proved acceptable, but there are some cases where, as a consequence of houses not being up to the same standard, the terms and conditions stipulated do not make the same appeal.

 

 

In July last year your Committee agreed to make house purchase advances to approved borrowers to the same extent as was proposed for building societies under the scheme set forth in the Ministry of Housing and Local Government Circular 42/54, dated 4th May, 1954, viz.:

 

   90% in the case of houses with a purchase price or valuation of £2,500, whichever is the lower;
 
   95% in the case of post 1918 houses with a purchase price or valuation of £2,000, whichever is the lower;

 

 at the favourable rate of interest, 4% per annum.

 

During the seven months under review the amount advanced on mortgages for house purchase and also for repairs, alterations, and extensions, was £872,188 11s. to 820 depositors, as compared with £582,679 15s. to 615 depositors for the corresponding period in the previous year. A very gratifying increase. It is hoped now that building licensing has ended the Bank will have still further opportunities of assisting depositors to purchase houses.

 

Since the Bank was established in 1919, mortgages totalling £14,659,862 have been granted to 29,631 depositors. The mortgages remaining in force number 7,359 representing an indebtedness of £3,977,735.

See Assisted Housing Scheme

re Sale of Municipal Houses