More mortgage customers will be able to stay with Northern Rock when their deals expire under a change to the bank’s remortgage strategy. The bank will continue to repay their government loans faster than expectations whilst retaining borrowers rather than forcing them to look elsewhere for a remortgage deal.
Remortgage deals were something to be address on the lender’s agenda. It was confirmed that Northern Rock were adopting the changes not only to stay in line with the government plans, but to also to try to reduce their mortgage portfolio.
The funding to mortgage consumers will be increased over time, to try to aid the financial recovery of the UK mortgage and financial markets.
The EU rules have some part to play in Northern Rock’s plans, since one of the major changes that the lender will make will see them offering strongly competitive deals to fewer new clients who may have been offered new deals with other competitors, in a bid to prevent their books from becoming too large.
The major issue with Northern Rock borrowers being almost ‘forced’ to remortgage was that it was placing undue pressure on other banks. With less money available to lend since the credit crunch of 2008, banks and building societies were having their credit taken up by agreeing deals for former Northern Rock customers. At the time, the struggling bank was trying desperately to reduce its mortgage lending in order to repay the government bailout loans.
It has been reported that the new plans have worked well, and that this has allowed them to continue to meet their state loan repayment goals over the past few weeks and months since the bank was bailed out during the financial crisis.
The lender is now viewed in a different light, as it shows increasing concern for the UK economy and for its customers, rather than its own profits. Although the government loan repayments may slow in the future as their mortgage client base reduces, it does mean good news for our financial markets.
Northern Rock commented to the press on their recent moves regarding remortgage contracts, and stated that in a bid to work with the government in increasing the UK markets’ capacity to lend for property purchases; they have been ensuring that the number of mortgage redemptions has been decreasing.
With remortgage rates falling, according to figures released of the past two months, Northern Rock should continue to see their mortgagees seeking to remortgage with them rather than move to a new provider, which will help them in their ventures to recover the business and repay the state.
The news however comes as quite painful to mortgage advisers who know that the markets are already extremely sluggish. The news of this strategy will clearly mean that the thousands of mortgage customers with Northern Rock will be unlikely to be moving elsewhere in the near future, however it does mean that the lender may be able to get back on track more quickly.