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Northern Rock: Mortgage Broker Reaction

Mortgage brokers have expressed surprise at the Government’s quick move to take Northern Rock into nationalisation, saying that the decision is not the optimum outcome for the financial sector.

Alexander Hall chief operating officer Andy Pratt says that he cannot believe there was not some way of continuing Northern Rock as a going concern under another brand.

“It seems too quickly to have gone for the fall-back option. It may be a good move for taxpayers but it’s not a good for anybody else. Unfortunately I think this is going to be a sorry tale.”

MortgageForce managing director Rob Clifford says: “I think the broker market has lost a real friend in Northern Rock. I think we can safely expect a period of benign activity, with the lender being completely risk averse.”

He adds: “I don’t think it’s the optimum outcome for the sector.”

John Charcol senior technical manager Ray Boulger says he would not be surprised if the Government decides to pull Northern Rock’s Together product due to the amount of bad publicity it has been getting over the last few months.

Pratt adds: “It would be a PR nightmare for the Government to back continuation of the product.”

But Pratt believes that the Together book of business is one of the assets that could be picked up quite early by other lenders and banks.

Premier Mortgage Service managing director John Malone says that in its last year of trading, Northern Rock was doing about 30 per cent of its business in that product. “It’s a sizeable bit of business to move on.”

Boulger says he does not think much will change from a customer point of view as Northern Rock has been largely uncompetitive since last August.

He says that there are two main ways the Government could look to raise money on Northern Rock’s mortgage book: whole loan sales or securitisation. Boulger points out that whole loan sales will become a more viable option before securitisation.

Malone says the Government will look at existing banks – the major high street players – to see how they can take some large lumps of the business of its balance sheet.

Pratt questions what will happen to the bank’s branches, stating that he cannot see much of a future for them as he does not believe many people will be interested in buying them.

But Malone disagrees, noting that Abbey’s parent company Santander has been open about its plans to build its branch base up. “I would have thought that this is one area of the business that may look attractive to other banks.”

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