384 PROVISION OF BORROWING FACILITIES. 



might be out of proportion to the amount of loan. The cost 

 of supervision is also saved. For the small farmer the procedure 

 proves far simpler than when bonds have to be obtained and marketed, 

 and other formalities satisfied as in the case of the LandscJiaften. 

 Their disadvantages consist in a higher rate of interest, liability to a 

 rise in the rate or to the recall of the loan, and the limited facilities 

 for reducible mortgages. As to the rate of interest : in 1909 the 

 predominant rate of interest payable on the bonds of the LandscJiaften 

 was 3i per cent., and on those of the State and Provincial Mortgage 

 Credit Banks 3i and 4 per cent., and on those of the Joint Stock 

 Mortgage Banks 4 and 3J, whereas in the same year 35*5 per cent., 

 of the mortgage loans made by the savings banks were at 4 per cent., 

 and 55*09 per cent, at over 4 but not exceeding 5 per cent. Loans 

 are liable to be recalled owing to the circumstance that savings banks 

 must be in a position to realise their assets if necessary at short notice ; 

 and they reserve the right to raise the rate of interest in order not to 

 be losers in the event of an increase in the rates paid for deposits 

 rendering unremunerative a former rate fixed at a time when the 



O 



deposit rate was lower. With respect to reducible mortgages there 

 occurs the same difficulty of lending money for a longer period than 

 that for which the lender has received it, but in recent years 

 there has been a considerable increase in the volume of rural mortgage 

 loans granted subject to sinking fund payments. In 1909 nearly 

 25 per cent, of the outstanding rural mortgage loans granted by 

 Prussian savings banks were granted on these conditions. 



Most savings banks restrict their Mortgage investments to 

 property situate in their own or neighbouring districts, or lend less 

 upon a property not within such limits; and a Prussian Ministerial 

 Order enjoined that the lending of money on mortgage security 

 outside the area of the bank should only be admissible when a fixed 

 period of redemption is stipulated, and when such mortgages do not 

 exceed the fourth part of its total mortgage investments. Under 

 present circumstances, the greater part of the money collected within 

 the particular areas is thus devoted to investment within the same 

 areas. Savings banks usually fix the limit of mortgage loans at (<l from 

 one-half up to two-thirds of the ascertained value of the property. 

 Many banks, however, with a view to encouraging the creation of 

 small holdings and allotments, are prepared to lend up to three- 

 fourths or even five-sixths of the value of newly purchased holdings 



