Northern Rock To Offer 90% Mortgages

 

Nationalised bank Northern Rock 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 will offer 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, as a rise in the number of lower deposit mortgages are expected to give a 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.

Other analysts urged Northern Rock to lend cautiously since it was risky lending that got the bank – and the global industry as a whole – into trouble in the first place.

A Northern Rock spokesman stressed that 90% home loans would "only form a very small part of the mortgage book as a whole" and that the lending criteria were strict.


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