David Prosser: Don't be alarmed by Northern Rock's move back into risky loans

Outlook: There are only 200 products available to buyers with a 10 per cent deposit, down from 800before the financial crisis struck

Northern Rock and risky loans – words that will unnerve anyone who remembers the lender's collapse in 2007, the first time Britain had seen a run on a bank in living memory.

But we should not necessarily be spooked by Rock's announcement yesterday that it is to return to the 90 per cent loan-to-value (LTV) market. For one thing, it is a misconception that it was the lender's infamous Together mortgage – a package through which borrowers were able to get loans worth 125 per cent of the value of the property they wanted to buy – that caused its collapse. Default rates on Together did prove to be higher, but it was Rock's aggressive funding model that got it into trouble.

For another, a mortgage market that functions well, which is what we need in Britain if the housing market is ever to return to normality (especially for locked-out first-time buyers), is one that offers a wide range of products priced in the context of risk. In offering these higher LTV loans, Rock will certainly be meeting demand, while also improving its own profitability thanks to higher margins.

Are 90 per cent mortgages inherently more risky than lower LTVs? Not necessarily: the risk of a borrower defaulting on a mortgage depends on their financial circumstances. It is true that there is a higher chance of negative equity on higher LTVs, but that, in itself, does not lead to default.

Rock's challenge, then, will be to make sure it lends only to those borrowers it judges capable of servicing the repayments. This is a challenge that it – like so many other lenders – has fluffed in the past, but in an era of tighter mortgage regulation and closer scrutiny from the watchdogs, one would hope it might do better this time. Any easing of credit conditions in the mortgage market – subject to responsible lending tests – is to be welcomed. To put Rock's initiative in context, there are 200 mortgage products available to buyers with a deposit of only 10 per cent – down from 800 before the financial crisis struck.



Message from Europe to lazy insurers

At first sight, it's another wonderful "Europe gone mad" tale. But as so often turns out to be the case with such stories, there is more to gender-based pricing in insurance than meets the eye.

Assuming the European Court of Justice (ECJ) follows the opinion of the advocate general, as is usually the case, it will today rule that insurers should not be allowed to consider gender when setting insurance premiums. So no more savings for women drivers, for example, who typically pay less for car insurance because statistics show they have fewer accidents.

On the other hand, no more reduced pensions either, with an end to insurers being able to sell smaller annuities to women on the grounds they tend to live longer. It sounds nonsensical. But read properly the opinion given by the advocate general last year and you'll discover this is not a case of putting the ideology of gender neutrality before the practical experience of insurers' claims departments.

Rather, the advocate general effectively accused insurers of pricing cover on the basis of gender because they can't be bothered to use more sophist-icated measures of risk.

Take annuities, for example. It is true that women, on average, tend to live longer than men. Theactuarial tables, however, obscure a string of complicating factors. Many of these are socio-economic or lifestyle-related. A man from a more affluent background with a healthy diet and an active lifestyle has a good chance of beating the odds that suggest an overweight woman who spends her days watching television will outlive him. But with the exception of extreme cases, he'll still get the larger pension.

In truth, many insurers price on the basis of gender because it is convenient for them to do so. But in age where companies know far more than ever before about their customers, there is no longer any excuse for such laziness.

The smartest insurers, by the way, will recognise there is an opportunity here. If they use this ruling as a reason to develop more accurate risk-analysis tools – rather than withdrawing from products in a huff, or just levelling premiums up – there will be gaps in the market to exploit.

Not that this is the end of the matter. Today's ruling will alsocreate a whole slew of new issues. Here's just one example: many insurers take people's occupations into account when pricing cover, but in instances where these occupations are dominated by women – nursing, say – will this still be legal?

Still, let's not fall into the trap of writing this ECJ judgment off as another case of Brussels trying to straighten our bananas. It is simply an attempt to force insurers to think a bit harder about the prices they charge.



Primark feels the consumer chill

A double warning from Primark: trading has slowed markedly in 2011 and the UK is the stand-out territory in Europe for this problem. The factors at play are not difficult to see – the VAT rise, higher clothing prices (as well as inflation), and falling consumer confidence, are combining to make people more reluctant to spend.

That Primark is feeling the squeeze, however, should alarm us. It has until now been resilient to the wider economic environment, not least because it has been able to avoid passing on price increases to consumers. That it is now being dragged down with the rest of the high street does not bode well.

Last week, the CBI said that retail sales had slowed very sharply during February and were set to be flat in March. But if Primark is finding the going so tough, the next few months may be even bleaker than we thought.

News
The surrealist comedian at the Q Awards in 2010
people
News
Russell Brand arriving for the book launch in East London
peopleRussell Brand cancels his book launch debate due to concerns about the make-up of the panel
Sport
Christiano Ronaldo enjoys his opening goal
champions leagueLiverpool 0 Real Madrid 3: Ronaldo and Benzema run Reds ragged to avenge thrashing from their last visit to Anfield
Arts and Entertainment
Awesome foursome: Sam Smith shows off his awards
music22-year-old confirms he is 2014’s breakout British music success
PROMOTED VIDEO
Life and Style
Six of the 76 Goats' cheese samples contained a significant amount of sheep's cheese
food + drink
Arts and Entertainment
Contestants during this summer's Celebrity Big Brother grand finale
tvBroadcaster attempts to change its image following sale to American media group
Extras
indybest
News
Wilko Johnson is currently on his farewell tour
people
Arts and Entertainment
Sarah Dales attempts to sell British Breeze in the luxury scent task
tvReview: 'Apprentice' candidate on the verge of tears as they were ejected from the boardroom
News
Call me Superman: one of many unusual names chosen by Chinese students
newsChinese state TV offers advice for citizens picking a Western moniker
News
ebooksAn unforgettable anthology of contemporary reportage
Voices
New look: Zellweger at Elle's Women in Hollywood awards on Monday
voicesRenée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity, says Amanda Hess
Arts and Entertainment
Julianne Moore and Ellen Page are starring together in civil rights drama Freeheld
film
Voices
'Irritatingly Disneyfied': fashion vlogger Zoella
voicesVicky Chandler: Zoella shows us that feminism can come in all forms
Life and Style
health
Arts and Entertainment
Pink Floyd on stage at Live 8 in 2005. From left to right: David Gilmour, Roger Waters, Nick Mason and Rick Wright
music New album The Endless River set to overtake boyband for most pre-ordered of all-time
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

Trainee Recruitment Consultant Birmingham

£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

Trainee Recruitment Consultants

£20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...

Day In a Page

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

'Renée Zellweger's real crime was to age'

The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
The 10 best smartphone accessories

Make the most of your mobile: 10 best smartphone accessories

Try these add-ons for everything from secret charging to making sure you never lose your keys again
West Indies tour of India: Hurricane set to sweep Windies into the shadows

Hurricane set to sweep Windies into the shadows

Decision to pull out of India tour leaves the WICB fighting for its existence with an off-field storm building
Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink