Tue, 01 Mar 11
It's hard to believe that the disgraced mortgage lender Northern Rock has introduced a new range of higher-risk mortgages to boost profits as it prepares to return to the private sector three years after lax lending practices led to its bailout and nationalisation.
The state-owned bank is offering three new mortgages each requiring a 10% deposit from borrowers – down from a previous 15% minimum. The new mortgages charge a higher interest rate than those requiring more equity to reflect the greater default risk.
Northern Rock’s move was welcomed by many in the industry, who said it would help first-time buyers enter the market. Ray Boulger, senior technical manager at John Charcol mortgage brokers, said: 'This is good for consumers, some of who will be able to get credit more easily, and it’s good for Northern Rock because it will increase its margins. This, in turn, is good for taxpayers, who own the bank.
'Other lenders will be watching this and I think Northern Rock’s presence in this market will increase the likelihood that more 90% mortgages become available in the next few months. The more lenders in a market, the more it attracts other lenders.'
A rise in the number of lower deposit mortgages should give a welcome boost to a sluggish housing market in which mortgage approvals for house purchases remained close to a two-year low in January with just 28,932 loans approved, according to the British Bankers’ Association.
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