Real estate and mortgage finance in England and the Low Countries, 1300–1800

Abstract

Mortgage markets in developing economies, both past and present, are often confined to social networks between private individuals. The inadequate registration of ownership of and encumbrances on borrowers' real estate has been offered as a reason for this, but it is questionable whether such registration provides either a simple or a complete explanation. This paper analyses mortgage markets between 1300 and 1800 in the Low Countries, where such registration was organised well, and England, where such registration was poorly organised. These historical cases show that registration was important for the emergence of broad mortgage markets but in the historical context successful markets took considerable time to appear. The rise of such markets also required changes in the mortgage laws and often depended on intermediaries for matching borrowers and lenders.

Public Functions, Private Markets: Credit Registration by Aldermen and Notaries in the Low Countries, 1500–1800

“…Low Countries town magistrates preceded notaries as administrators of credit transactions by several centuries. In all major cities in Flanders, Brabant, and Holland, the registration of private loans by the court of aldermen (schepenbank) can be traced back to the fourteenth century, if not earlier (Zuijderduijn 2009: 184-90;Van Bochove et al 2015). The reason for this was the formal obligation for property owners to register loans secured on real estate with the local authorities.…”

“…On the other hand, the loan did not have to be secured on a specific piece of real estate. More often than not the parties agreed upon a so-called general mortgage, a formal claim on someone's person plus all his or her present and future possessions in the form of real estate or other goods (Van Bochove et al 2015;Van Hoof 2015: 85-140). This turned the schepenkennissen into transferable claims not dissimilar to IOUs (promissory notes) circulated by businessmen in Antwerp and Amsterdam (Van Der Wee 1967; Gelderblom and Jonker 2004;Puttevils 2015a), but with the additional legal security of formal registration.…”

“…A feudal relic gave local landlords the right to keep their own administration of property transfers and related credit transactions, without obligation to register them with the aldermen. Consequently, notaries were able to develop a practice in providing a service that hardly existed before (Van Bochove et al 2015). This formed very much an exception.…”

Review of periodical literature published in 2015

“…Land markets are tightly connected to mortgage finance. Van Bochove et al. compare the development of real estate and mortgage markets in the Low Countries and England in the very longue durée ( c . 1300–1800), to understand why they were confined to limited networks of private individuals.…”

“…These questions about the state of development of communication and information systems—highly pertinent of course in our current age—have also preoccupied historians of finance. Van Bochove et al. offer a comparison of mortgage finance in England and the Low Countries between 1300 and 1800 that argues that the latter developed a more uniform and better organized registration system for land transactions that facilitated the emergence of a more extensive and secure mortgage market that was less dependent on personal ties, and more effective than the decentralized English system. Li examines the impact of information asymmetry on the movement of London–Antwerp exchange rates against the backdrop of England's ‘Great Debasement’ of 1544–51 and the revaluation of gold coins in the Habsburg Netherlands in 1539, concluding that early modern financial markets—or at least the London–Antwerp exchange markets—were much better integrated than is often thought, but this effective integration was hampered when information was slow and costly to acquire, as it was with English debasement.…”