Outlook: Northern Rock

TIMES ARE tough in the mortgage market, which is why Leo Finn has found himself between a Northern Rock and a hard place. Last year the chief executive of the building society-turned-bank decided to sacrifice margins to build market share. Handing back pounds 8,000 for every pounds 100,000 borrowed ought to have been a surefire way of achieving that.

However, the Rock figured without the major league players in the mortgage market also turning mean, not to mention Standard Life popping up with its own mortgage division. So while margins duly contracted, so did the Rock's share of the market. In the second half of the year, net lending shrank by more than a half, while the bank's share of net new lending fell from 11 per cent to 7 per cent.

In order to make up ground on those big ugly competitors such as Prudential, Mr Finn is launching a mortgage that permits housebuyers to borrow more than the value of their homes. Mr Finn calls it the Together mortgage. Most others would call it an unsecured loan. It was activity of this sort that helped create the unsustainable credit bubble of the late 1980s and then left homeowners and mortgage lenders picking their way through the rubble when the property market predictably crashed.

Never mind. Memories are short and Mr Finn has a new interest group - namely his shareholders - to keep sweet by proving that he is growing the business. The Rock certainly needs to do that. Its proportion of first- time buyers is well below the market average, forcing it to rely on the less profitable remortgage market.

Every customer Mr Finn signs up at rock-bottom rates is at least forced to buy some other product like compulsory insurance, so rising fee income is making up for shrinking interest margins.

But overall the Rock looks to have embarked on a high-risk strategy at a time when the housing market is flat in its north-east heartland and the Prudential has lain an Egg that, by the Rock's own admission, is making parts of the savings market uneconomic.

The Rock's shareholders did not like what they saw yesterday. Those who are still building society members and who are tempted to become shareholders should take note.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
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

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss