In regard to the rate of interest to be charged on mortgage advances, the Bank's 1919 Regulations (Regulation 68) stated that "Interest
on advances shall be charged at the rate of one penny per pound per month on the balance outstanding, or such other rate as the Committee
of Management may from time to time determine, and which is in force at the time the advance is made".
This Regulation therefore
fixed the rate to be charged throughout the life of the advance as that "in force at the time the advance is made". Despite
this rule, loans made in 1920 at 6¼% were reduced (with the permission of the Treasury) to 5%. The ability to reduce the rate
on existing mortgages (but not increase it) was formally obtained in the 1925 Regulations. Regulation 82 stated that:
"Interest on
advances shall be charged at such rate per pound per month on the balance outstanding as the Committee of Management may from time
to time determine, but in the case of an advance already made the rate of interest in force at the time of the advance shall not be
exceeded."
Interest Rates charged on this 'fixed' basis applied until 1971 at the following rates:
September 1st 1919: 5%
June
14th 1920: 6¼% (although loans were at fixed rates, borrowers at this rate were allowed the benefit of the lower rate,
when it returned to 5% in 1922)
May - July 1922: 5% (Proposed on May 5th 1922 for new Advances. For existing
mortgages at the rate of 6¼%, the exact date is unknown, but the Bank's General Committee minuted on July 17th 1922 that "the
Treasury had intimated that their consent would be given in the reduction in the rate of interest .... to 5%")
1935:
4½%
(The Bank's Annual Report to the City Council dated June 4th 1935 stated that "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". That decision of the Committee was made on the recommendation of the House Purchase Sub-Committee held on February
11th 1935:
1754 The Sub-Committee proceeded to consider the question of the rate of interest charged on house purchase
advances, which question had been referred to them by the General Committee at the last meeting.
The Chairman reported that an
interview had recently taken place between the Chairman of the General Committee, Alderman Barrow and himself, together with the General
Manager and Assistant General Manager upon this question. After careful consideration they had come to the conclusion that the time
had arrived when a reduction of the rate to 4½% should be made in order to secure increased business. It was proposed that such reduced
rate should apply to all new mortgages and that existing Mortgagors whose accounts do not fall into arrear should have an equivalent
advantage. Consideration has also been given to reducing the rate to 4% but it was felt that this reduction would not be justified
at present, in view of the decision to continue to allow 3% on deposits.
After careful reviewing the facts, the Sub-Committee
came to the conclusion that a reduction of the rate from 5% to 4½% should be made, such reduced rate to apply to all new mortgages
entered into on and after the 18th February 1935. It was, however, deemed desirable that the mortgage deed in these cases should if
possible contain a provision whereby a mortgagor in default should be charged an additional ½% and, with this object in view, the
Chairman, the Chairman of the General Committee, and Councillor Martineau, with the General Manager were deputed to interview the
Town Clerk.
The Sub-Committee felt that subject as hereunder mentioned existing mortgagors should be granted an allowance equal
to ½% from the rate of interest charged at the end of a period commencing and expiring on dates to be fixed later, such allowance
to apply in cases where mortgagors are not in arrear on the day immediately preceding the commencing date and do not subsequently
fall into arrear with their payments during the period in question; also that such allowance continue to be made, on the same conditions,
at the expiration of each subsequent yearly period until the Bank Committee otherwise decide. It is intended that this allowance should
be credited to the Savings Bank Accounts of the respective mortgagors. The financial effect of this concession would mean that there
would be a reduction of interest receivable by the Bank of approximately £6,000 in a full year.
1755 RESOLVED:- That
the General Committee be recommended to reduce the rate of interest charge on house purchase advances as above indicated, and to instruct
the Town Clerk and General Manager to take the necessary steps to give effect to the proposals.)
November 1st 1945:
4%
(The Annual Report to the City Council for the year ended March 31st 1946 stated that "the rate of interest on new mortgages
was reduced from 4½% to 4% as from 1st November, 1945, and a rebate will be made on old mortgages".)
January 1st 1947: effective
rate 3½% due to ½% ex-gratia payment by Bank to mortgagor
(In the Annual Report dated June 1947 it was stated that "from January 1st
last, although new mortgages would continue to provide for interest at the rate of 4% per annum, a concession of ½% would be allowed
until further notice, making the effective rate of 3½% per annum. These ex-gratia allowances will be credited to the Savings Bank
accounts of mortgagors at the 31st December each year.")
August 1st 1950: 3½%
April 1st 1952: 4%
August 8th 1955: 4½%
1965:
5%
1967: 6%
Mortgages granted from 1971 were at Variable Rates:
1971: 7½%
1973: 8%
1974: 9%
1975: 11%
1976:
12%