Thrifty Loans

Finally Northern Rock has axed its 125% mortgage following a raft of criticism in the last week.

The bank, which is in the process of being nationalised, will no longer offer its Together mortgage as it tried to put itself back on a firmer footing by reducing its mortgage book and its risk exposure.

Northern Rock has decided to cut its mortgage book back, but questions are being asked after it came to light that much of the bank’s best loan portfolio are not part of the public ownership deal as they are held by Granite, a separate entity, not subject to nationalisation. Northern Rock, without these assets, and letting customers go, will be left with reduced quality mortgage debts.

The bank was at the forefront of banks and building societies providing mortgages of over 100%, and has followed Abbey, Alliance & Leicester and Coventry Building Society in pulling the mega-homeloans this week.

Analyst at Moneyfacts.co.uk, Michelle Slade, commented: “It seems Northern Rock has finally given in to external pressures and pulled its high risk 125% LTV product. Since the 7th of February Moneyfacts has seen Northern Rock re-price its whole mortgage range to an uncompetitive position compared with the rest of the market. This would appear to be an attempt to stave off taking on any new mortgage business. Northern Rock is at the start of a difficult journey and this appears to be one of the first of many prudent steps it is likely to undertake along the way.”

Now, the only lender left offering 125% mortgages is Birmingham Midshires, and it is unlikely to want to go it alone, and will probably fall into line.

All mortgage lenders have been reassessing their product ranges as market conditions tighten and are now more reluctant to lend to those with poor credit histories or high loan-to-value ratios. There are fears that those coming to the end of 100%-plus mortgages will find that repayments rocket, but they are unable to find credit elsewhere.