During the 1930s, in order to deal with their ever-increasing size of depositors’ funds, the societies needed to change the public’s conception of housing and persuade more people to buy rather than rent their homes. The public had to be made aware of the advantages of home ownership. More promotion was carried out by the societies to redress the problem of the weak advertising where the copy was crude in design and overcrowded. Sir Enoch Hill had been an apprenticed printer and the founder of the Leek Times before he joined the society in 1903. He developed the advertising materials of the Halifax with some skill during the 1930s. The Co-op had also increased its budget of advertising from £400 per annum in 1913, including printing and stationery, to £28,405 by 1931 (24). This amounted to ‘nearly £20 for every £1,000 of assets to finance the advertising and promotion drive and the figure was to continue to increase in the years up until the second world war’ (25). The Abbey Road society ran several advertisements showing a Mr Tenant and a Mr Homeowner and the reason why happiness came through home-ownership They also had full-page advertisements in most editions of the Builder and the Illustrated Carpenter and Builder during the 1930s, making direct appeals to builders to arrange mortgages through them. The advertising was undertaken for three reasons. First, to make builders aware of what the societies could do for them. Secondly, to make the public aware of the size, age and security of the society which was doing the promotion and why they, the public, should deposit funds with them. Thirdly, to induce potential agents to take an agency with the society in question which may have meant closing an arrangement which they had with another society. The professional journals and daily newspapers of the time, both national and local, show that advertising was mainly carried out by the bigger societies. This led to the increase in the size of deposits and mortgages granted by the larger societies to the detriment of the smaller societies.
The heavy advertising was necessary as in addition to growing depositors’ funds, the societies were faced with the fact that many of their loans granted in the growth period after 1919 were now maturing. In 1938 when the boom was slackening, Walter Harvey said ‘that while our mortgage business will probably decline, repayment of loan instalments and investments by shareholders and depositors are filling our treasuries to overflowing. Improved economic conditions in Great Britain have had the effect of stimulating the thrift habit among wage earners’ (26). Borrowers on mortgages repay their advances by making constant payments. In the early years the payments are applied to interest cost while in the later years the monthly payments are used for the reduction of the principle or capital outstanding. The majority of mortgages granted after 1919 had been for terms of no more than ten to fifteen years, so in the 1930s many were close to the time when they would have been repaid. The average life of a mortgage in the 1930s grew from twelve years in 1933 to sixteen years in 1938 (27). Those mortgages granted in the latter part of the 1920s would have been at a stage where the majority of the payments were being applied for the purposes of repayments of capital. As these funds from repayments could be recycled around as new loans the requirement for new funds from investors decreased. However, the societies could not stop depositors placing their money with them and in the rush to grow and move up the league table of building societies they were actively encouraging investors to deposit with them rather than another society. Size and age clearly mattered to the societies as many of their advertisements emphasize the size of their total assets mortgage and their length of establishment. Size implied safety, which was important as the stock market crash of the late 1920s was a recent memory. The league tables were published in the BSG on a regular basis which showed total assets and deposits from investors but never a full breakdown of the profits, directors’ salaries or costs of administration. The annual Building Societies Year Book during the 1930s always showed a list of the top 108 societies in the front of the publication. These statistics were compiled from the annual returns made by the societies.
The accounts of the societies showed that it was possible that by the end of the 1930s the amount of new depositors’ funds required by the societies to finance new mortgages would have only been about 25 to 30 per cent of the value of the loans advanced. On average, £97 million would be repaid per annum. This was compared with the amounts being lent which were in the order of £132 million per annum, a calculation that does not allow for the reserves of £148 million and the balance from the profit and loss account for 1938 which was £18.7 million. Other hidden reserves were contained in office premises depreciation or the sale of properties in hand. A less conservative attitude towards bad debts would have had the effect of boosting the reserves further. These figures are extracted from The Economist survey for 1939 which shows figures up to the end of 1938 for the top 110 societies (28).
Bad debts were not a significant problem for the societies as The Economist Survey records. In 1938 the number of houses foreclosed was 264 and the number of properties twelve months in arrears was 319. The Halifax Building Society Special Reserve Number 2 fund, which was provided to meet losses from the sale of properties in possession, was never called upon. Their losses in 1936-37 represented only 4.4 p per pound of mortgage interest charged or 0.0022 per cent of interest due (29). Interviews with those who worked for building societies at the time revealed that the builders who had built the house often would take over the responsibility for the mortgage when the initial buyer was unable to keep up the repayments. This would assist in maintaining a good relationship with the building society who had provided the original advance and prevent the guarantees which formed the ‘builder’s pool’ being called upon.
Loans for home ownership were being made by trades unions and friendly societies and others but the building societies were very aggressive, and expanded into the housing market at the expense of all other lenders at the time.
(24) E. Cleary, The Building Society Movement (London,1965), p.192.
(25) M. Cassell ,Inside Nationwide:One Hundred Years of Co-operation (London, 1984), p. 45.
(26) BSG ( October 1938), p. 881.
(27) The Economist ( 1 July 1939), p. 17.
(28) The Economist (1 July , 1939), p. 11.
(29) Halifax Building Society,Eighty Years of Home Building (Halifax, 1937), p .78.