James Daley: Rock should offer new deals to all

Mortgage customers at Northern Rock have had an uncertain few months. After hearing last September that the bank was on the verge of going bust, some dared to wonder whether they might be one of the few beneficiaries of the crisis – perhaps allowed to walk away from a large chunk of their home loan. Alas, this isn't exactly how bank insolvencies work. However, there may well have been something to be gained for existing mortgage customers, had the bank been taken over by a strong and financially solvent rival bank.

Northern Rock's eventual nationalisation, however, was far from ideal. Within days of the Government's announcement, the bank declared that it would not be offering new mortgages to existing customers once their current deals came to an end.

In better times, this may not have been such a tragedy. But at a time when lenders are tightening their belts and becoming ever more picky about who they offer a loan to, it could be bad news.

Remortgaging is no longer a straightforward business – even for those with a decent amount of equity in their property. But for the thousands of Northern Rock customers who took out home loans worth 90, 100 or even 125 per cent of their property's value, it is going to be very difficult indeed to find a new lender to take them onto their books once their current deal expires.

Although this week's news of Lloyds TSB's tie-up with Northern Rock may have sounded like a reprieve, it will mean nothing for all those Northern Rock customers who have little or no equity in their homes. Lloyds has effectively agreed to offer fee-free mortgages to all Northern Rock's best customers – those who have at least 20 per cent equity in their home. For these people, the Lloyds tie-up may well prove to be great news. No valuation fees, no legal fees, no application fees – and a rescue from the jaws of the Rock's punitive standard variable mortgage rate of 7.49 per cent.

As well as being no use for those with proportionately large loans, it strikes me that the Lloyds deal will also not do much good for the Government either. While it will help them reduce the size of their mortgage book, it promises to leave them with a bag full of the riskiest business.

If those who are left in negative equity at the end of their deal cannot find any other lender to take them on, they'll be forced to stay with the Rock and see their mortgage payments leap by 25 per cent or more.

For many, that may be enough to push them over the edge, forcing them to default on their loan.

Surely the Government would have been better striking a deal with a lender that agreed to take both the good and the bad.

There's surely no way it can now come to a similar arrangement for those who are left out – but if it sticks to its guns and refuses to let these people remortgage, it may be left with no alternative than to start repossessing hundreds of properties. That would not be great PR for an already embattled Alistair Darling.

Given that it has struck a deal to help its wealthier customers, Northern Rock must now do the honourable thing, and agree to offer new deals to all those who can't find a bank that will accept them elsewhere.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Compliance Manager

    £40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

    SThree: Talent Acquisition Consultant

    £22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

    Recruitment Genius: Experienced Financial Advisers and Paraplanners

    Negotiable: Recruitment Genius: This extremely successful and well-established...

    Guru Careers: FX Trader / Risk Manager

    Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

    Day In a Page

    Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

    Making of a killer

    What motivated a shy student to kill 38 holidaymakers in Tunisia?
    UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

    Just when you thought your commute couldn't get any worse...

    Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
    Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

    The Real Stories of Migrant Britain

    Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
    Cheaper energy on the way, but it's not all sunshine and rainbows

    Cheaper energy on the way, but it's not all sunshine and rainbows

    Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most
    Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

    No grace of God for Katy Perry as sisters act to stop her buying convent

    Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
    Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

    Residents just want water and power in a city chosen to be a ‘smart’ metropolis

    The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
    Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

    Something wicked?

    Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
    10 best sun creams for body

    10 best sun creams for body

    Make sure you’re protected from head to toe in the heatwave
    Wimbledon 2015: Nick Bollettieri - Milos Raonic has ability to get to the top but he must learn to handle pressure in big games

    Nick Bollettieri's Wimbledon files

    Milos Raonic has ability to get to the top but he must learn to handle pressure in big games
    Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

    There is more than a shiny trophy to be won by England’s World Cup women

    The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with cynicism and greed
    How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

    How to stop an asteroid hitting Earth

    Would people cooperate to face a global peril?
    Just one day to find €1.6bn: Greece edges nearer euro exit

    One day to find €1.6bn

    Greece is edging inexorably towards an exit from the euro
    New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

    'Iron Man' augmented reality technology could become reality

    Holographic projections would provide extra information on objects in a person's visual field in real time
    Sugary drinks 'are killing 184,000 adults around the world every year'

    Sugary drinks are killing 184,000 adults around the world every year

    The drinks that should be eliminated from people's diets
    Pride of Place: Historians map out untold LGBT histories of locations throughout UK

    Historians map out untold LGBT histories

    Public are being asked to help improve the map