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Mortgage Interest Rates
 
House Purchase
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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 6% 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: 6% (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 6%, 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: 4%
(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 4% per annum".)
 
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 4% to 4% as from 1st November, 1945, and a rebate will be made on old mortgages".
 
January 1st 1947: effective rate 3% due to % 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 % would be allowed until further notice, making the effective rate of 3% 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: 3%
 
April 1st 1952: 4%
 
August 8th 1955: 4%
 
1965: 5%
 
1967: 6%
 
Mortgages granted from 1971 were at Variable Rates:
 
1971: 7%
 
1973: 8%
 
1974: 9%
 
1975: 11%
 
1976: 12%