Thrifty Loans

Northern Rock is scrapping many of its mortgage products as it continues to struggle in the current credit crisis. It is cutting two thirds of its mortgage range as it overhauls its products for the first time since going cap in hand to the Bank of England.

Despite the cut-backs experts say that the changes will not affect to crisis-hit bank’s risk profile as it would still be offering 125% loans based on a combination of secured and unsecured loans. It was these that contributed to the bank’s problems in the first place.

Northern Rock has cut its range of different rates for loan-to-value products and will now only offer single rate for all loans of up to 95% of a property’s value. The one and a half years fixed rate mortgages are also pulled, together with the cash-back option, which helped people cover costs.

Enhanced multiple income deals for people taking out fixed rate mortgages for five years or more have been scrapped. The bank will now offer multiples of 2.8 to 4.9 times salary, depending on credit rating and income.

The ‘Together’ mortgages have gone for three-year fixed and variable rates. In these people could borrow 95% of the property’s value plus an unsecured loan of up to 30% value, capped at £30,000. Together products still exist for two and five year fixed deals.

Spokesman for Northern Rock, Ron Stout, said: “Our product range has been refreshed to reflect current conditions. We will continue to lend in a prudent and responsible way and maintain the excellent quality of our mortgage book, that still has defaults of less than the industry average.”

Experts feel that the risk profile is not greatly changed, and the alterations to the product range look more like streamlining and cost cutting than anything more significant.