Edeus, a sub-prime mortgage lender, is offering customers an 8 per cent discount to cash in their home loans early to get them off the company's books.
In addition to the discount, the specialist lender is waiving early redemption charges and exit fees if they move to another lender by the end of their term.
The deal has been offered to 400 customers to test demand but, if it proves popular, edeus could extend it to its other borrowers. The Wolverhampton-based company said that 20 per cent of eligible customers had so far expressed their interest in early repayment.
The lender was founded in 2006 to take advantage of the chunky margins available for loans to people with patchy credit records and the markets' appetite for buying the loans parcelled up as bonds. It originated more than £1.4bn of mortgages in its first year of trading, but its business model was wrecked by the credit crunch as investors shunned sub-prime mortgage assets and funding costs rocketed.
Securitisation markets have effectively shut for business after rocketing defaults on US sub-prime loans caused the value of complex mortgage-backed securities to tumble.
The company managed to sell £500m of mortgage loans to Stroud & Swindon Building Society in October but potential buyers are now demanding big discounts. The offer to customers gives edeus a better deal than selling the loans to financial institutions, it said.
The company stopped lending in April and is trying to switch its business to making money from assessing the level of risk in the loan books of holders and buyers of mortgage assets. Alan Cleary, managing director of edeus, said: "We need to utilise our capital as effectively as possible to fund our new business ventures.
"Presently, it's proving challenging to do that through traditional channels, such as whole loan trading and the securitisation markets. This is going to release capital in a cost-efficient manner and help fund our successful expansion into lending services." The company wants to go back into lending when the markets start operating smoothly again.
Mr Cleary said that by referring customers redeeming their loans to mortgage brokers, edeus was maintaining its links with those advisers.
"While other lenders are cutting brokers out of the deal we're supporting the market by introducing the client back to the original broker," he added.Reuse content