Just keep an eye on what is going on at Northern Rock. While it would make almost no economic sense to flog the bank off in the next year, the Prime Minister would like nothing better than to go into the election campaign crowing about having rescued the lender and restored it to health, which selling it into the private sector might enable him to do.
Does this desire explain Northern Rock's move to begin offering better mortgage terms to its own customers than to new borrowers, the first time it has employed this differential pricing strategy since coming under Government control? One handy little effect of this move is that the loan to value of the average Rock borrower is likely to come down, since remortgaging borrowers will have paid off more of their loans than those taking out fresh mortgages. Better LTV stats would be a big help in any sale of Rock, though most analysts still believe that it is the bank's retail savings book that is most attractive to the private sector.
Whether or not this is the rationale behind the new deals at Rock, there is a danger the bank is being over-generous – which at best is poor management, but at worse could cause state aid problems with the European Commission. Independent brokers say Rock's new deals are priced more competitively than they need to be to encourage existing borrowers to stay put.Reuse content