Chapter 14 of J P Hilton's book Britain's First Municipal Savings Bank describes the development of the House Purchase Department
from 1919 to 1927. That Chapter is reproduced here:
The development of the House Purchase Department has been phenomenal, and
can be attributed to two factors, viz., the general publicity given since the war to the question of house ownership, and the inducements
offered to citizens to purchase Municipal houses. Activities in this direction have been prominently brought before the public by
such bodies as the Woodlands Housing Society, Weoley Hill Limited, the Bournville Works Housing Society, the Birmingham Mutual Housings
Limited, and others, whilst many builders have contributed to this publicity by announcing easy terms of purchase.
followed by the Bank admits of applications being dealt with expeditiously, providing full information is given on the application
form and the title to the property is not complicated. The first step to take, after having selected a house, is to fill up an application
form, and forward it to the Bank, with a nominal valuation fee of ten shillings. It saves time if the applicant brings the form personally
to the Head Office so that any further information required can be obtained at once. Applicants must be depositors in the Bank, and
the house must be within the city. The Bank does not advance money to an existing mortgagor, nor undertake to advance further money
upon a house already in mortgage, unless an undertaking is given to discharge the one mortgage before the other is created.
next step taken is to have the house valued. As soon as the information in the case is complete the Bank instructs its valuer to inspect
the house and furnish a report, together with his valuation. The valuer, who is not a regular official of the Corporation, but a member
of the profession in private practice, makes his inspections once or twice a week according to the number of applications to be dealt
with, but if an urgent valuation is specially required it can be arranged between the applicant and the valuer on terms. In such cases
the valuation and report goes to the applicant direct, but it will be accepted by the Bank, if an application is subsequently made,
without any further fee being charged.
On several occasions it has been suggested that the deposit of some given minimum amount
should be an essential qualification before purchase facilities are allowed, but the housing situation has been, and still is, such
as to call for few restrictions or limitations. Therefore, if a person is qualified as a depositor in the Bank, and is of full age,
an advance towards the purchase will be granted if the security offered is satisfactory.
The question is sometimes asked whether
an advance can be granted to a married woman. It has always been the practice to grant such advances, providing the husband was made
a party to the mortgage, but the committee realise there are cases where such a requirement should be waived, and they have taken
a sympathetic view and made other arrangements on being satisfied that such a course was desirable.
In the case of freehold property
there is no question as to an advance being granted, providing the valuer's report is favourable, but in the case of leasehold property
the lease must have fifty years unexpired to qualify for an advance. No distinction is made between pre-war or post-war houses, other
than what is disclosed by the valuer's report.
Depositors have the option of arranging the period of the loan up to a maximum
of twenty years, but it is advisable that applicants should arrange for repayments to be spread over twenty years in the first instance.
The monthly repayment is governed by the amount and period of the loan, and therefore, a lower figure applies in the case of a twenty
years' loan than would be the case in a short-period loan. By deciding on the longer period the depositor is in a better position,
if for any reason he finds it difficult to meet his monthly obligations. There is complete freedom to pay off the loan whenever the
depositor wishes to do so, and so long as the minimum monthly amount is met, a depositor may pay as much in excess as he likes.
the early days, the amount which ought to be advanced on a post-war house presented a difficulty, owing to the uncertainty of values.
For some time advances were granted up to 50 per cent of the building cost, ie the contract price of the house, with a limitation
of Ģ800 in any single case; then the practice was varied by granting loans for ten years up to one-half of the contract price, for
fifteen years up to one-third, and for twenty years up to one-fourth. But in December, 1921, the practice of basing the advance on
the valuation was adopted, with a maximum of 80 per cent, and a limit of Ģ1,000 in respect of a single house. Advances on pre-war
houses have always been governed by the valuation. Up to December, 1921, loans up to 80 per cent of the valuation, with a limit of
Ģ600 on a single house, were made, but since that date the limit has been increased to Ģ1,000, the percentage remaining as before.
The reason for fixing a limit at all was to encourage citizens who do not require large houses to become house-owners instead of remaining
as tenants. In the view of the committee there are ample opportunities available in other directions for dealing with the larger and
more expensive class of property.
It is not the desire of the Bank to assist speculation in house property; it is established
for the purpose of helping citizens to buy houses to live in, or purchase those they reside in. Consequently, we require an assurance
that where the applicant is not already residing in the house it is his intention to do so. There are cases where one, two or more
houses have to be purchased to secure possession of one, the vendor being unwilling to sell otherwise. The Bank is prepared to assist
in these special cases to the extent of three houses, but beyond that number we do not go. Reasons often exist for purchasing two
houses adjoining each other, such as a man desiring to have a relative living next door to him, and in such cases it is the policy
of the Bank to help.
Some applicants would like the Bank to advance money on business premises, but is not its function to do
so. When applying for powers, the object of the Corporation in this matter was expressly stated, viz, to assist people to own their
houses, and it was never intended to use the funds of the Bank to assist in the purchase of business premises. Where the property
consists of a house and shop the Bank will advance up to 80 per cent of the value of the premises as a dwelling-house.
of interest charged on mortgages was fixed at the commencement of the Bank at one penny per pound per month on the balance outstanding,
but it became necessary to increase this rate in June, 1920, to 1žd per pound per month. The committee were reluctant to raise the
figure but money values, and the practice of other lending organisations, indicated such a course to be necessary. As soon as it was
possible to reduce the rate the committee made the reduction, and accordingly in May, 1922, brought down the rate to one penny per
pound per month again, at which figure it remains. Feeling that those depositors who had entered into mortgages at the higher rate
were at a disadvantage, through no fault of their own, the committee decided to allow them the benefit of the reduced rate and permit
them to pay such lower rate as from May, 1922. We could have insisted on our "pound of flesh" as many organisations did, but a sense
of fair dealing prompted the Bank to make this concession.
The Town Clerk is the solicitor to the Bank and prepares the mortgage
without any charge to the depositor; he also satisfies himself that the title to the property is a good one and such as can be accepted.
Depositors can rest content that once the Town Clerk is satisfied with it they have something sound as their possession. The conveyance
of the property, and any other legal work which may be necessary, must be undertaken by a solicitor engaged by the depositor.
the depositor accepts the offer of an advance by the Bank, arrangements are made to cover the property against fire, and as soon as
the mortgage is completed the policy is taken out. During the whole period of the loan the property is kept insured against fire.
The premiums on the policy are paid by the Bank in the first instance, and subsequently charged to the depositor's account. This practice
saves the trouble of dealing with annual premiums and having to produce receipts to the Bank. Unless the title deeds fix the amount
of insurance, it is the practice of the Bank to allow depositors to determine the amount, so long as it covers the advance, but if
the matter is left to the Bank the insurance will be affected in a sum equal to the amount of the loan. The insurance policy can be
taken out to suit the wishes of the depositor in various ways as follows:
Under Scheme A the rate is 1s. 6d. per cent and covers
damage by fire in respect of buildings of private dwelling-houses constructed of brick, stone or concrete, and roofed with slates,
tiles, metal, concrete or asphalte, and the following contingencies are covered:
Fire (whether resulting from explosion
or otherwise) not occasioned by or happening through:
(a) Its own spontaneous fermentation or heating or its undergoing any process involving the application of heat,
(b) Earthquake, subterranean fire, riot, civil commotion, foreign enemy, military or usurped power, rebellion or insurrection:
Explosion of boilers used for domestic purposes only;
Explosion, in a building not being part of any gas works, of gas used for domestic purposes or used for lighting or heating the building.
B, the contents of a house may be insured at the rate of 2/- per cent against the same risks as Scheme A.
Under Scheme C, the
rate is 1s. 9d. per cent (subject to the insurance being for the full value of the house) and covers the risk mentioned in Scheme
A, plus the following contingencies:
Loss of rent (limited to 10 per cent of the sum insured in respect of
rent), aircraft, burglary, housebreaking, property owners' liability.
Under Scheme D, the contents of a house may be insured
at the rate of 5s. per cent (subject to the full value being insured and with a minimum premium of 7s. 6d. per cent) to cover the
Fire, explosion, lightning, thunderbolt, burglary, housebreaking, larceny, civil commotion, theft,
aircraft, earthquake, breakage of mirrors, servants' goods, labour
to servants, liability to public riot, strikes, military or usurped power (other than foreign enemy).
Loss of rent
(limited to 10 per cent of the sum insured)
Cash in house (limited to 5 per cent of the sum insured - not exceeding
Storm (limited to 5 per cent of the sum insured)
Tempest (limited to 5 per cent of the sum
Flood (limited to 5 per cent of the sum insured)
Damage to buildings by burglars, compensation
for death of insured, bursting or overflowing of water apparatus or pipes.
The desire, expressed by many depositors, for some
scheme whereby hardship or embarrassment may be avoided in the case of death of the depositor, has been met by arranging schemes of
One scheme provides for a policy being taken out in a sum not less than the amount of the mortgage, the premiums
being paid yearly, half-yearly or quarterly. The rate is dependent on the age of the depositor, and the amount of the assurance, but
taking the case of a depositor, whose age would be thirty-five next birthday, and the amount of the assurance as Ģ400, the quarterly
premium would be Ģ2 2s 0d. In the event of death of the depositor, during the period of the loan, Ģ400 would be paid to the legal
representative. If the depositor should survive and the loan be repaid, the assurance may be continued or other arrangements made.
scheme is a reducible assurance, whereby the depositor can provide against the risk of death by taking out a series of policies equal
to, or in excess of, the mortgage and covering a period of twenty years. For example:
Take a mortgage of Ģ400 and the age of the depositor
to be thirty-five next birthday. Four policies of Ģ100 each would be issued, the first expiring in five years, the second in ten years,
the third in fifteen years, and the fourth in twenty years.
The premium for the first 5 years would be Ģ8 8s. 0d. per annum.
for the next 5 years would be Ģ6 6s. 0d. per annum.
The premium for the next 5 years would be Ģ4 4s. 0d. per annum.
The premium for
the last 5 years would be Ģ2 2s. 0d. per annum.
As each policy is surrendered important returns are made, as follows:
At the end of
the fifth year
..Ģ4 16 0
At the end of the tenth year
. Ģ10 4 0
At the end of the fifteenth year
. Ģ16 0 0
end of the twentieth year
... Ģ22 2 0
Ģ53 2 0
Thus it works out that for an average
payment of Ģ2 11s. 10d. per annum, or 1s. 0d. per week, the depositor can cover against the risk of leaving those dependent on him
in an embarrassed position.
Another scheme is to effect a reducible assurance on lines similar to the above, but with no surrender
values. This has the effect of lowering the annual premium.
Taking the case of a depositor whose age next birthday will be twenty-five,
the annual premium for an assurance of Ģ400, reducible by Ģ100 at the end of each five years, would be as follows:
First five years
.. Ģ3 17 0 covering the sum of Ģ400
Second five years .
.. Ģ2 18 0 covering the sum of Ģ300
Third five years
Ģ1 19 0 covering
the sum of Ģ200
Fourth five years ..
Ģ1 0 0 covering the sum of Ģ100
Under the regulations, ground rent receipts in respect
of leasehold property must be produced to the Bank within thirty days from the date due, failing which the Bank may pay the rent and
charge the depositor accordingly. The production of receipts has been a source of trouble and expense to mortgagors, and no less troublesome
and expensive to the Bank.
In the case of leasehold Municipal houses purchased with assistance from the Bank, these receipts
had to be made out by the Estates Department half-yearly, and produced to the Bank. This procedure was laborious, and called for simplification.
Arrangements have now been made so as to reduce clerical labour to a minimum, by charging the ground rent to the account of the borrower
and collecting the amount with the next monthly repayment. The Estates Department render a detailed account of ground rents due and
one payment by the Bank and one receipt by the Estates Department covers the position.
Finding the benefit of the arrangement
in respect of Municipal houses, the Bank took steps to make a similar arrangement in the case of non-municipal leasehold houses. This
could only be done with the sanction of the depositors, but no difficulty was experienced when the matter was fully explained. To-day,
there are only one or two cases where the old arrangement is in force.
An important action was taken by the City Council in October,
1922, when it was decided to provide facilities whereby the tenants of Municipal houses might buy their houses. The Council directed
the Bank and Estates Committees to prepare a scheme for giving effect to that decision.
Many conferences took place, resulting
in the presentation of a joint report to the Council in January, 1923. The Council authorised the sale of houses erected by the Council,
and sanctioned the use of the money received from such sales for the erection of additional houses; and instructed the Bank and Estates
Committees to formulate and bring into operation a scheme for utilising the existing machinery of the Bank in connection therewith.
The Public Works and Town Planning Committee, who are charged with the duty of building Municipal houses, fix the sale price, and
hand over the houses to the Estates Committee for disposal either by way of tenancy or sale. The Estates Committee select the purchasers
and introduce them to the Bank, and providing the Bank approve the selection, the usual procedure for effecting a mortgage is followed.
this scheme was inaugurated the Bank advanced up to 80 per cent of the value of the house, as ascertained by the valuer, the purchaser
finding the difference between the loan and the purchase price. Conferences took place with a view to further popularising the purchase
of Municipal houses, and as a result a scheme was adopted whereby houses could be purchased on payment of a deposit of Ģ60 in the
case of a parlour-type house, or Ģ50 in the case of a non-parlour type house, the Bank being responsible for the advance up to 80
per cent of the valuation, and the Finance Committee being responsible for the excess amount necessary to complete the purchase. This
concession to would-be purchasers gave an impetus to the sales.
In March, 1925, the Lord Mayor (Alderman Percival Bower) took
up the question of offering still further inducements in respect of the sale of Municipal houses. He convened meetings of the committees
interested, pressed for more favourable terms, and urged that something should be done to encourage sitting tenants to buy their houses.
The result of these meetings led to the fixing of lower deposits - in the case of parlour-type houses Ģ25, and in the case of non-parlour
type houses Ģ20 - and a special arrangement for sitting tenants to become owners on payment of one per cent of the purchase price.
low deposit terms have resulted in many citizens becoming owner-occupiers instead of tenants, as the following numbers indicate:
of mortgages effected up to 31st March 1927
Amount advanced up to 31st March 1927
will be realised that amongst so many, there are some who find it difficult to keep up their repayments, but in few cases has it been
necessary to take serious action. Cases of embarrassment can generally be met by a little leniency, and the Bank Committee have always
dealt in a sympathetic manner with genuine cases brought to their notice.
Taking the house purchase business as a whole, mortgages
have been arranged in 6,767 cases representing Ģ2,232,480, in the short space of seven years and seven months. That is no mean achievement;
it is a testimony to the need of the Bank in the city, and, again, a tribute to the confidence of the citizens in the Bank.
psychological effect of the creation of owner-occupiers in the city is important. It lifts the individual out of the class who are
dependent on the whim or fancy of a landlord. He will cease to pay rent year after year and never own a brick in his house; he will
realise it is a wiser policy to be his own landlord; he will learn to become independent. House-ownership, moreover, gives a man a
direct interest in the affairs of his city, and anything which tends to create a keener interest in the affairs of our city should
Many builders have so much confidence in the Bank that they readily advance money on second mortgage to an applicant
who finds himself short of the necessary amount required as a deposit. They know the Bank is part of the Corporation's activities
and that is a sufficient safeguard.
The following analysis of the 5,380 mortgages in force at the 31st March, 1927, is interesting:
not exceeding Ģ100
Balances over Ģ100 but not exceeding Ģ200
Balances over Ģ200 but not exceeding
Balances over Ģ300 but not exceeding Ģ400
Balances over Ģ400 but not exceeding Ģ500
over Ģ500 but not exceeding Ģ600
Balances over Ģ600 but not exceeding Ģ750
Balances over Ģ750 but not exceeding
It is sometimes said by people who know nothing about the matter
that the Bank is not catering for the working-man. Whatever is meant by the term "working-man", the following classification of occupations
of the 6,767 depositors who have bought houses through the Bank since its establishment and up to the 31st March, 1927, speaks for
 Engineers, Fitters, Chainmakers, Turners, Millwrights, Mechanics, Toolmakers, Diesinkers,
Machinists, Lamp Makers, Tinsmiths, Coopers, Gunsmiths
 Brassworkers, Steel Workers, Iron Workers, Metal Workers, Tinplate Workers, Rubber Workers,
Electrical Workers, Leather Workers, Tube Workers, Gas Workers, Glass Workers, Cycle Workers,
Japanners, Polishers, General Workers
Contractors, Bricklayers, Stonemasons, Slaters, Plasterers, Joiners, Carpenters, Cabinetmakers,
French Polishers, Painters, Decorators, Sign Writers, Upholsterers, Undertakers, Plumbers
 Tailors, Saddlers, Shoemakers
 Printers, Compositors,
Bookbinders, Lithographers, Publishers, Engravers, Designers, Artists, Photographers ..
Drapers, Grocers, Dairymen, Fruiterers, Florists, Fishmongers, Greengrocers, Butchers
Hairdressers, and other Shopkeepers
 Employees of Railways
and Tramways Undertakings
 Postal Employees, and Employees
of Government Departments
 Employees of Local Authorities and Public
 Chauffeurs, Gardeners, Porters, Laundrymen,
Nurserymen, Horsekeepers, Publicans,
Boarding House Keepers,
Window Cleaners, Caterers, and other Domestic Employees
 Insurance Agents, Officials,
and Other Agents
 Chocolate Workers
 School Teachers, Nurses, Milliners, Dressmakers, Costumiers, Modellers
 Clerks, Bookkeepers, Cashiers, Draughtsmen, Travellers, Salesmen, Buyers, Storekeepers, Shop Assistants,
 Jewellers, Watchmakers,
Silversmiths, Goldsmiths, Musicians
 Managers, Foremen, Superintendents,
 Architects, Auctioneers, Solicitors,
Barristers, Doctors, Clergymen, Ministers, Civil Engineers,
Dentists, Surveyors, Stockbrokers, Professors, Lecturers, Journalists, Chiropodists, Opticians
 Merchants, Manufacturers, Directors, Dealers, Factors
Married Women, Widows, and Spinsters, not classified
The reason why Nos. 19 and 20 are not more particularly classified
is because the Bank, in its early days, did not ask for information as to the occupation of an applicant, but it is reasonable to
suppose the great majority were workers.
Progressive totals of Advances at the end of each Financial Year (Ģ):
1920 (Seven Months only)
March 31st 1921
March 31st 1922
March 31st 1924
March 31st 1925
March 31st 1927
The Council took a further step towards
easing the housing problem when they ordered a scheme to be prepared for advancing money by way of mortgage to persons willing to
build houses. The Bank and the Estates Committees presented a joint report in which they pointed out that the Corporation possessed
the necessary powers under Section 7 of the Birmingham Corporation Act, 1919, to advance money by way of mortgage to persons to build
houses, but the Bank, as constituted under Section 12, were limited to advancing money on mortgage to enable persons to purchase houses
It was ultimately decided that the Finance Committee should advance money on progressive mortgage to persons
to build houses within the city on freehold land, or on land leased for the purpose by the Corporation. At a later stage it was arranged
that similar assistance should be granted to persons erecting houses on land leased to them by parties other than the Corporation.
A scheme was adopted which provides for these applications being dealt with by the Public Works and Town Planning Committee. The Finance
Committee advance the money on certificates issued from time to time by the city surveyor, and the Bank acts for the city treasurer
in collecting the repayments, and arranges the transfer to a Bank mortgage as soon as the final payment under the progressive mortgage
has been made, unless the loan is entirely paid off. Up to the 31st March, 1927, the Bank had dealt with seventy of these cases.