BUILDING SOCIETIES.
THE main object of a Building Society is to aid
a man to become proprietor of his own dwelling.
This can be accomplished by means of the society
in two different ways:- 1, by depositing with
the society periodical money savings until, with
the interest allowed, enough has been accumu-
lated to buy a house; 2, by borrowing from the
society a sufficient sum to purchase a house
and repaying the loan, with interest, by instal-
ments spread over a term of years. A person
desiring to become a depositor must qualify for
membership of the society by paying an entrance
fee of; say, 2s. 6d. He then takes up a share and,
by paying periodical instalments according to
the tables, he becomes entitled at the end of the
appointed time to receive £100.
The same applies proportionately to a half
share of £50 or to a quarter share of £25. For
example, as regards the whole share, a person
paying 13s. a month regularly to the society is
entitled, at the end of ten years, to be repaid a
lump sum of £100, and any bonus added thereto
which the profits of the society may afford. If the
term be fifteen years, then, to secure £100, he will
have to pay only 7s. 7d. every month, and if
twenty-one years, then a monthly payment of
4s. 7d. The terms vary in different societies,
but those quoted have been adopted by an exist-
ing institution of repute. If the term of ten
years is selected, the depositor will have saved
and paid to the society (with added interest) £78
in all; if the term of fifteen years is chosen he
will have paid £68 5s. in all; and if twenty-one
years be adopted, £57 15s. In either case, at the
end of the term he has selected, the depositor
will be paid back £100. Thus any one taking
a share for £100, and keeping up the instalments
for twenty-one years, will in the end have paid
only £57 15s. for it -- the difference being met
by the interest paid by borrowers from the
society. The following table shows particulars
of other terms and the monthly subscription
payable:-
-----------------------------------------------
| Term | Monthly Sub- | Term | Monthly Sub- |
| of |scription for a| of |scription for a|
|Years.| £100 share. |Years.| £100 share. |
|------|---------------|------|---------------|
| | £ s. d. | | £ s. d. |
| 3 | 2 12 10 | 13 | 0 9 1 |
| 4 | 1 18 8 | 14 | 0 8 4 |
| 5 | 1 10 2 | 15 | 0 7 7 |
| 6 | 1 4 6 | 16 | 0 6 11 |
| 7 | 1 0 6 | 17 | 0 6 4 |
| 8 | 0 17 6 | 18 | 0 5 10 |
| 9 | 0 15 2 | 19 | 0 5 4 |
| 10 | 0 13 0 | 20 | 0 5 0 |
| 11 | 0 11 8 | 21 | 0 4 7 |
| 12 | 0 10 6 | | |
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After the first year a depositor may, if desirous,
withdraw, on giving one month's notice, the full
amount he has paid, with interest, to the date
when the subscription ceases. This prevents
the possibility of any loss arising to a depositor
in the event of his being unable to keep up his
instalments, or desiring from any cause to with-
draw from the society. It may, however, in case
of a loss of confidence, operate seriously against
the society, by the sudden withdrawal of de-
posits. The following table shows the amount
that could be claimed, in respect of the monthly
subscriptions paid, at the end of the several
years of membership.
SHOWING THE AMOUNT WITHDRAWABLE AT THE END OF EACH YEAR FOR THE
RESPECTIVE MONTHLY SUBSCRIPTIONS STATED IN THE ABOVE TABLE.
------------------------------------------------------------------------------------------------------------------------
| At the | £ s. d. | £ s. d. | £ s. d. | £ s. d. | £ s. d. | | | | | |
| end of | 2 12 10 | 1 18 8 | 1 10 2 | 1 4 6 | 1 0 6 | 17s. 6d. | 15s. 2d. | 13s. | 11s. 8d. | 10s. 6d. |
|Year of | per | per | per | per | per | per | per | per | per | per |
| Mem- | month, | month, | month, | month, | month, | month, | month, | month, | month, | month, |
|bership.| 3 years.| 4 years.| 5 years.| 6 years.| 7 years.| 8 years.| 9 years.| 10 years.| 11 years.| 12 years.|
|--------|----------|----------|----------|----------|----------|----------|----------|----------|----------|----------|
| | £ s. d. | £ s. d. | £ s. d. | £ s. d. | £ s. d. | £ s. d. | £ s. d. | £ s. d. | £ s. d. | £ s. d. |
| 1st | 31 14 0 | 23 4 0 | 18 2 0 | 14 14 0 | 12 6 0 | 10 10 0 | 9 2 0 | 7 16 0 | 7 0 0 | 6 6 0 |
| 2nd | 64 19 0 | 47 11 0 | 37 2 0 | 30 2 8 | 25 4 2 | 21 10 6 | 18 13 1 | 15 19 9 | 14 7 0 | 12 18 3 |
| 3rd |100 0 0 | 73 2 0 | 57 1 2 | 46 6 10 | 38 15 6 | 33 2 0 | 28 13 9 | 24 11 9 | 22 1 4 | 19 17 2 |
| 4th | -- |100 0 0 | 78 0 2 | 63 7 2 | 53 0 2 | 45 5 1 | 39 4 5 | 33 12 4 | 30 3 5 | 27 3 0 |
| 5th | -- | -- |100 0 0 | 81 4 6 | 67 19 2 | 58 0 4 | 50 5 8 | 43 1 11 | 38 13 7 | 34 16 2 |
| 6th | -- | -- | -- |100 0 0 | 83 13 2 | 71 8 4 | 61 17 11 | 53 1 1 | 47 12 3 | 42 17 0 |
| 7th | -- | -- | -- | -- |100 0 0 | 85 9 9 | 74 1 10 | 63 10 1 | 56 19 10 | 51 5 10 |
| 8th | -- | -- | -- | -- | -- |100 0 0 | 86 17 11 | 74 9 7 | 66 16 10 | 60 3 1 |
| 9th | -- | -- | -- | -- | -- | -- |100 0 0 | 86 0 1 | 77 3 8 | 69 9 3 |
| 10th | -- | -- | -- | -- | -- | -- | -- |100 0 0 | 88 0 10 | 79 4 9 |
| 11th | -- | -- | -- | -- | -- | -- | -- | -- |100 0 0 | 89 9 11 |
| 12th | -- | -- | -- | -- | -- | -- | -- | -- | -- |100 0 0 |
| 13th | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- |
| 14th | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- |
| 15th | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- |
| 16th | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- |
| 17th | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- |
| 18th | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- |
| 19th | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- |
| 20th | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- |
| 21st | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- |
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| At the | | | | | | | | | |
| end of | 9s. 1d. | 8s. 4d. | 7s. 7d. | 6s. 11d. | 6s. 4d. | 5s. 10d. | 5s. 4d. | 5s. | 4s. 7d. |
|Year of | per | per | per | per | per | per | per | per | per |
| Mem- | month, | month, | month, | month, | month, | month, | month, | month, | month, |
|bership.| 13 years.| 14 years.| 15 years.| 16 years.| 17 years.| 18 years.| 19 years.| 20 years.| 21 years.|
|--------|----------|----------|----------|----------|----------|----------|----------|----------|----------|
| | £ s. d. | £ s. d. | £ s. d. | £ s. d. | £ s. d. | £ s. d. | £ s. d. | £ s. d. | £ s. d. |
| 1st | 5 9 0 | 5 0 0 | 4 11 0 | 4 3 0 | 3 16 0 | 3 10 0 | 3 4 0 | 3 0 0 | 2 15 0 |
| 2nd | 11 3 5 | 10 5 0 | 9 6 5 | 8 10 2 | 7 15 10 | 7 3 5 | 6 11 3 | 6 3 0 | 5 12 9 |
| 3rd | 17 3 8 | 15 15 2 | 14 6 8 | 13 1 5 | 11 19 7 | 11 0 5 | 10 1 9 | 9 9 1 | 8 13 5 |
| 4th | 23 9 9 | 21 11 0 | 19 11 10 | 17 17 5 | 16 7 7 | 15 1 5 | 13 15 10 | 12 18 7 | 11 17 1 |
| 5th | 30 2 3 | 27 12 6 | 25 2 3 | 22 18 3 | 20 19 11 | 19 6 5 | 17 13 8 | 16 11 6 | 15 3 11 |
| 6th | 37 1 5 | 34 0 3 | 30 18 3 | 28 4 0 | 25 16 11 | 23 15 8 | 21 15 4 | 20 8 1 | 18 14 1 |
| 7th | 45 4 2 | 40 14 2 | 37 0 0 | 33 15 3 | 30 18 9 | 28 9 3 | 26 1 1 | 24 8 6 | 22 7 10 |
| 8th | 53 18 9 | 49 8 3 | 44 18 0 | 40 19 10 | 36 5 8 | 33 7 8 | 30 11 1 | 28 12 11 | 26 5 2 |
| 9th | 62 2 4 | 56 17 8 | 51 13 10 | 47 3 8 | 43 3 5 | 39 14 10 | 35 5 8 | 34 2 7 | 30 6 5 |
| 10th | 70 13 5 | 64 14 6 | 58 16 5 | 53 13 8 | 49 2 7 | 45 4 5 | 41 7 5 | 38 16 8 | 34 11 9 |
| 11th | 79 13 1 | 72 19 4 | 66 6 3 | 60 10 3 | 55 7 9 | 50 19 8 | 46 12 10 | 43 15 7 | 40 1 5 |
| 12th | 89 1 9 | 81 12 4 | 74 3 5 | 67 13 8 | 61 19 1 | 57 0 5 | 52 3 5 | 48 19 5 | 44 16 5 |
| 13th |100 0 0 | 90 16 8 | 82 8 5 | 75 4 2 | 68 17 0 | 63 7 5 | 57 19 7 | 54 10 0 | 49 16 3 |
| 14th | -- |100 0 0 | 91 1 9 | 83 2 5 | 76 1 10 | 70 0 8 | 64 1 6 | 60 0 0 | 55 1 1 |
| 15th | -- | -- |100 0 0 | 91 8 5 | 83 13 11 | 77 0 ___| 70 9 7 | 65 18 8 | 60 11 1 |
| 16th | -- | -- | -- |100 0 0 | 91 8 5 | 84 7 8 | 77 4 0 | 72 3 5 | 66 6 8 |
| 17th | -- | -- | -- | -- |100 0 0 | 92 1 10 | 84 5 3 | 78 14 5 | 72 8 0 |
| 18th | -- | -- | -- | -- | -- |100 0 0 | 91 13 6 | 85 11 11 | 78 15 5 |
| 19th | -- | -- | -- | -- | -- | -- |100 0 0 | 92 16 4 | 85 9 2 |
| 20th | -- | -- | -- | -- | -- | -- | -- |100 0 0 | 92 9 8 |
| 21st | -- | -- | -- | -- | -- | -- | -- | -- |100 0 0 |
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For example, the depositor of 13s. a month
for a ten years' term, if he desired to withdraw
his savings at the end of six years, would be
entitled to £53 1s. 1d.; the depositor of 7s. 7d. a
month for fifteen years could claim, at the end of
the ninth year, £51 13s. 10d.; and the depositor
of 4s. 7d. a month for twenty-one years could
get back £44 16s. 5d. at the expiration of the
twelfth year. In each case the earnings of the
depositor would have been increased by the
interest added.
BORROWERS.
A member desiring to effect an immediate
purchase of a house or property may borrow the
money required by depositing the title deeds
with the society as security, and repaying the
loan by instalments, monthly or quarterly.
Or if he elect to build a house himself; he
deposits the deeds of the land with the society
and takes up a loan by instalments as the work
proceeds. In this case an architect or surveyor
would have to give a certificate from time
to time to the effect that so much money could
be advanced upon the work actually done; and
the repayment of the loan would only begin
when the house was finished. The following
table shows the repayments required, including
interest for each £100 advanced:-
--------------------------------------------
| Term of years. | Monthly. | Quarterly. |
|----------------|------------|------------|
| | £ s. d. | £ s. d. |
| 1 | 8 14 0 | 26 4 6 |
| 2 | 4 10 0 | 13 11 4 |
| 3 | 3 3 0 | 9 9 11 |
| 4 | 2 8 9 | 7 7 0 |
| 5 | 2 0 3 | 6 1 4 |
| 6 | 1 14 7 | 5 4 3 |
| 7 | 1 10 6 | 4 12 0 |
| 8 | 1 7 6 | 4 2 11 |
| 9 | 1 5 2 | 3 15 11 |
| 10 | 1 3 5 | 3 10 7 |
| 11 | 1 1 11 | 3 6 1 |
| 12 | 1 0 8 | 3 2 4 |
| 13 | 0 19 8 | 2 19 4 |
| 14 | 0 18 9 | 2 16 6 |
| 15 | 0 18 0 | 2 14 3 |
| 16 | 0 17 4 | 2 12 3 |
| 17 | 0 16 9 | 2 10 6 |
| 18 | 0 16 2 | 2 8 9 |
| 19 | 0 15 8 | 2 7 3 |
| 20 | 0 15 3 | 2 6 0 |
| 21 | 0 14 11 | 2 5 0 |
--------------------------------------------
And in like proportion for larger or smaller
loans.
In many societies it is a common practice to
ballot amongst the members for the right to
receive an advance (sometimes without carrying
interest) which right may be transferred, for a
consideration, to some other member.
By this table it will be seen that a person
borrowing £100 for ten years would have to
repay the amount by monthly instalments of
£1 3s. 5d., or by quarterly instalments of
£3 10s. 7d., and if borrowing for a term of
twenty-one years, then by monthly instalments
of 14s. 11d., or quarterly of £2 5s.
Now, if we refer to the depositor's table of
rates, we shall find that he has, for a ten years'
term, paid to the society £78, and received back
£100; thus receiving from the society £22 (the
difference) for the use of the money, plus the
interest added. On the other hand, a borrower
of £100 for the same term pays back, beyond
the capital sum of £100, as much as £40 2s. in
interest. Thus there is a difference of £18 2s.
between the interest received by the depositor
and that paid by the borrower. This constitutes
the gross gain of the society on these trans-
actions, but out of it has to be paid the expenses
of the office, salaries of officials, and a reserve
provided for bad debts, &c.
The social and moral utility of societies estab-
lished for the direct purpose of aiding a man to
become proprietor of his dwelling-house is obvi-
ous, and the above calculations seem to show
that a society conducted on the plan represented
would earn an ample margin of profit for all
contingencies.
Doubtless the greater number of the existing
building societies, including the one whose
figures have been quoted, are conducted in a safe
and legitimate manner, but there have been, and
may still be, exceptions.
As an inducement to join a building society,
people are told that they have to pay, on the
instalment system, the same as though they paid
the rent of a house, and in a few years will
become the owner. A man who has paid for
three or four years only what he would have paid
for rent, would have very little hesitation in
throwing up his contract with the society, if the
locality became objectionable to him or the in-
evitable repairs of a cheap house were more than
he could bear. The money borrowed is lent
chiefly upon the security of small suburban
houses, a kind of property always in course of
depreciation, and it may be that the society
would have returned upon its hands a number of
houses in a bad state of repair and in a dete-
riorating locality. The instalments having ceased
and the houses void, the property becomes a
profitless burden upon the society and a probable
ultimate loss. When "jerry" builders are large
customers of a building society and have some
influence, direct or indirect, with its Board of
Directors, the evil is greatly aggravated. Whole
streets are built with borrowed money, on specu-
lation until, perhaps, there are twice as many
houses as can possibly be let.
The society, to protect itself, is bound to con-
tinue advancing until it is drawn completely into
the net and finds itself encumbered with a lot of
unsaleable and useless property. To stave off
the evil day when all things must be disclosed
to the trusting member, "financing" is restored
to, money raised on direct deposit, and advances
obtained from banks. The money thus raised
tides the society over their difficulties for a time,
but it may be that some rumour or report influ-
ences members and depositors to withdraw their
money, and eventually the coffers are empty and
the end arrives.
Unhappily, in the collapse of more than one
building society during the last few years there
have been revealed frauds and dishonesty of the
most flagrant character, and hundreds of trusting
investors of the industrial classes have been
ruined through the machinations of scoundrels,
some of whom posed as philanthropists and ultra
righteous members of society. To protect the
interests of members and depositors, only men
of unimpeachable character and business ability
should be elected Directors of a building society,
and the audit ought to be of the strictest char-
acter. The balance-sheet should present details
of the securities upon which the advances are
made, and the auditors should certify that they
have examined the deeds and identified them
as representing the property described in the
balance-sheet. Generally speaking, the auditors
appointed by the members are not lawyers, and
have not the necessary skill for verifying the
documents relating to the property, indeed they
are not expected to do so. One of the auditors
should certainly be legally qualified to ascertain
that the securities of the society do represent the
properties set forth in the balance-sheet, and he
should give a certificate to that effect. If this
course were insisted upon, such scandals as have
been brought to light could hardly be repeated,
where one set of deeds was made to do duty for
the assets of three distinct societies, each man-
aged by the same Board of Directors; and the case
in which the deeds of abandoned or destroyed
property were palmed off upon the auditors to
represent securities which had practically no
existence. The industrial classes are less careful
than those above them in seeing to the safety of
their investments, and some legislation seems to
be called for to prevent their hard-earned savings
being frittered away by bad management or rank
dishonesty.