The nationalised bank and the Government released news detailing Northern Rock’s return to the mortgage market today. Both pledged £14bn for mortgage lending and a return to 90 per cent loan to value mortgages.
Northern Rock chief executive Gary Hoffman said this morning: “The company has been substantially restructured and we are in a much better shape to move forward from here.”
But in a press conference this lunchtime Hoffman played down the bank’s involvement in higher LTV lending.
Hoffman said: “Affordability is the key issue. We might do some business at 90 per cent, but we will test this market very carefully. It is likely that we will end up with more low LTVs as we go forward in the weeks and months.”
The bank also quashed any hope for the borrowers stuck on Northern Rock’s 4.79 per cent standard variable rate; many of whom Hoffman admitted would be in negative equity by now.
He said the door is definitely closed on 95 per cent or 100 per cent lending for existing clients, and the bank will not be looking to do any more than change the rate on a limited amount of those high LTV loans.
“Our focus is on purchases,” he said, “there is more work to be done in the area of our existing customers. We need to make sure we lend safely.”
It also revealed it would limit lending to first-time buyers. Hoffman said: “It would be great news to help first-time buyers and it would be great news to help those who have been excluded from the mortgage market but we are not saying we will be lending a lot of 90 per cent loans to first-time buyers.
“We want to do some relatively small loans to unlock chains, we are not focussing on first-time buyers, but we hope to do some lending. £14bn will not change the market overnight, but it is a small and important contribution.”
Northern Rock also admitted that the £14bn would not available to the entire intermediary market. Hoffman said: “We have strong relationships with some intermediaries, but this is not going to be available to all intermediaries. I also wish to do more lending through our branches.”
Hoffman did confirm that it would not be restricting the lending to the much-criticised panel of chosen mortgage brokers, which have been dealing with the bank’s recent deleveraging programme.