BUYING FARMS WITH LAND-BAXK LOANS. 



19 



It is a striking fact that the average rate of interest on second 

 mortgages is about the same as the average on first mortgages made 

 by private lenders, as obtained by an earlier investigation made by 

 the department. In fact, the average rate on first mortgages, 6.9 

 per cent, is slightly higher than the average for second mortgages. 

 A comparison of average rates by Federal land-bank districts shovrs 

 also a considerable degree of correspondence. (See figs. 5 and 6.^) 

 While the averages for the two classes of mortgages are only roughly 

 comparable, the correspondence in the two rates is sufficiently close 

 to suggest that probably rates on second mortgages do not tend to 

 average much higher than those on first mortgages. 



/ ^""""is.s' 



RATE OF INTE 



ON 



SECOND MO 



REST PAID 

 RTGAGES 







X) 



1 ''^ 



(>Cr 



L 



6.4 ^ C 



2: 



&^ 



Hi.'/ 



^ ., \ 



( 6->-.,, r 



S — vi 



( \ ^-^ / / 



-S "w 



7.1 \j' 



\ 





1 



r \ 



€.9 



^-CI^ 



7.9 



\ \ "7.6 j 



3 



^■^-.y 





FIGURES SHOW 8r LAND BANK DISTRICTS 



\/^ 











AVERAGE RATE OF INTEREST ON SECOND MORTGAGES ^N^ 











FIRST MORTGAGE HELD BY FEDERAL LAND BANKS 







.^- 





Fig. 5. — Average rate of interest paid on second mortgages, by Federal land-bank districts. 



The tendency for average rates of interest on second mortgages to 

 approximate closely the first-mortgage rates has been confirmed also 

 by a recent survey of land sales in Iowa, where the average rates on 

 second mortgages proved to be 5.7 as compared with 5.3 for first 

 mortgages.^ 



At least two important conditions may be considered responsible 

 for the tendency. In the first place, a large proportion of second 

 mortgages are given to sellers of land who for one reason or another 

 are willing to give better credit terms than would be allowed if the 



^ The data on first mortgages are based on reports for 47 States, the results of which 

 are published in Department Bulletin 3S4. This bulletin gives no average for the entire 

 United States. The average employed above, therefore, is an average by States. More- 

 over, the data wen^ obtained in 1013. For these reasons the averages are only roughly 

 comparable. 



» Farm Loan Values in Iowa, by L. C. (Jray and O. G. Lloyd, Bulletin 874, U. S, Dept. 

 of Agriculture, p. 17. 



