Northern Rock has launched a range of mortgages for people borrowing up to 90 per cent of the property value – in a bid to help first time buyers get on the property ladder.
The bank, which was the first to benefit from a government bailout when the credit crisis hit in 2007, sees the return to potentially riskier lending as a way to boost revenue ahead of a likely return to full private ownership.
The company’s traditionally aggressive lending stance at one time saw it offer 125 per cent mortgages, however in common with other UK lenders adopted a more cautious approach to mortgage limits during the financial crisis, with a maximum lending limit of 85 per cent of the property’s value.
The return to 90 per cent lending is likely to prove popular with home buyers – but while Northern Rock could benefit from the profitability of these products, they also represent a higher risk, particularly at a time when market conditions exert downward pressure on house prices.
90 per cent mortgages are still uncommon in the current UK lending market – there are currently around 200 such mortgages available, which is around a quarter of the number offered prior to the financial crisis.
The new range of ‘Everyday’ mortgages from Northern Rock includes a 2-year fixed rate at 5.99 per cent, a 3-year deal at 6.49 per cent and a 5-year product at 6.59 per cent. None of the mortgages have product fees, which will be another draw to first time buyers with a limited amount to spend up front.
Northern Rock’s Customer and Commercial Director, Andy Tate, said: “Our new products, which will be offered within our prudent risk appetite and only to customers with good affordability, should appeal to those who have lower deposits and First Time Buyers.”
Referring to a new commitment to provide a full delivery service to first time buyers, he added: “First time buyers are important to the housing market. Having listened to those customers, we have developed a service that not only helps them to arrange the right type of mortgage that they can afford, but also supports them through the various steps in the process.”
