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Northern Rock May Cause Remortgagees Nightmare

Before Northern Rock got itself into a little trouble and was subsequently nationalised, its mortgages proved popular predominantly because of its flexibility.  The mortgage lender offered 125 percent mortgages and offered home loans up to five times a person’s salary at a time when other banks only offered three-and-a-half.

However, it has now increased its interest rates because it doesn’t want as many mortgages on its books now that its priority is to pay back its loan to the government.

Katie Tucker of John Charcol, a mortgage broker, says: “Northern Rock’s mortgages are currently extremely uncompetitive, with rates, in some cases, more than 1.5% higher than other lenders.”

As current borrowers of Northern Rock come to the end of their fixed rate deals, Northern Rock will be hoping its uncompetitive rates will force them to remortgage to other lenders.  However, the changed climate might be bad news for some of these borrowers who might find it difficult to find another lender willing to offer them a mortgage at such a high LTV or if they had a bad credit record.

Tucker says: “Only a few lenders still offer deals at more than 100%, so anyone with an existing mortgages in excess of 100% should overpay as much as possible now, as their chances of having a remortgage option when the time comes are slim.”

If they are unable to switch, then current borrowers may be forced to try and stay with Northern Rock whose standard variable rate is currently at 7.59 percent.  For many people, their mortgage payments would soar and they might be forced to sell their house.

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