But hang on – why stop at Northern Rock? The taxpayer already has significant shareholdings across other lenders, so why isn’t the model being replicated more widely when the housing market is on the verge of implosion?
A straw poll across the Home of Choice network found the majority of intermediaries agree that publicly-funded lenders have a duty to offer market-generating deals rather than seek to exploit their profit margins.
That means addressing both high rates and high deposits. It is widely anticipated that Northern Rock will offer mortgages to borrowers with just a 10 per cent deposit to break through the logjam of high-deposit deals that exclude too many first-time buyers.
Will the Prime Minister’s mortgage deal come at a price? The move is trailed as “sensible” – not prudent.
For this initiative to be effective and inspire confidence in the market, Northern Rock must turn up the heat with a more competitive deal than five-year fixed rate deals, priced at around 6.5 per cent currently available from C&G, Abbey and Halifax.
But even assuming that Government-backed lenders will be offering correctly priced mortgages, further positive action is still needed to support first-time buyers and provide a safety net for people in danger of arrears and repossessions.
Once again, lenders backed by the taxpayer need to take the initiative and identify some solutions such as expanding shared-ownership plans and longer mortgage terms.
To prevent a recurrence of the repossession crisis, one course of action is for lenders to deal with intermediaries who introduce quality mortgage business and stop supporting the poorly qualified rogue elements that fly under the regulator’s radar yet still manage to do business in this market. Home of Choice has recently taken the bold move to guarantee the quality of the business we introduce to lenders.
It was always implicit in our negotiations with lenders but we have made the decision to make quality an explicit facet of contract negotiations. We not only stringently vet advisers before they join our high producing, high quality team but we have also invested heavily in technology that ensures every sale is compliant and we remain committed to a better than industry average ratio for field quality managers.
The demise of Northern Rock was a major kick in the butt – an unwelcome but not unexpected wake-up call for us all. Once seen as one of the rock-steady lending institutions, it collapsed under the scrutiny of media attention and then the customer backlash. Let us hope that its phoenix-like rise from the ashes provides a shot in the arm for the market.
Gerry O’Brien is chief executive of Home of Choice