Rumours in the media this week say that nationalised bank Northern Rock could be preparing to re-launch its range of mortgage products, including its first high LTV mortgage deal aimed at the first time buyer market since its nationalisation in the credit crunch.
Reportedly, the bank is preparing for a sale or stock market flotation once again and this could involve buying back the mortgages that are currently with its ‘bad bank’ sister firm.
In 2010, Northern Rock was separated into two individual banks – with the one that took the high risk home loans being nicknamed by the media as the ‘bad bank’ whilst the ‘good bank’ took the low risk mortgages and customer deposit accounts.
If the reports are indeed true and the partial purchase of the ‘bad bank’ proceeds, then this would mean speedier payment to the taxpayers, allowing Northern Rock to return once again to the private market.
It is expected that advisers will shortly be appointed to look after the flotation or sale of the ‘good bank’.
Northern Rock still makes large losses and so buying mortgage portfolios make allow it to make a fast route back to a profitable state.
Somewhat ironically, the so-called ‘bad bank’ is actually profitable. Assisted in part by the record low base interest rate held by the Bank of England for some time, fewer than 10 percent of the mortgages that were deemed risky are in a state of arrears.
Mortgage regulator the Financial Services Authority (FSA) has agreed that the bank may reduce its cash reserves and start lending again, which includes agreeing to allow it to purchase mortgage portfolios once more.