Northern Rock relaxes mortgage criteria
Northern Rock has relaxed its mortgage lending criteria and will start to offer its best rates to people with 25% deposits again, rather than those with at least 30% to put down.
The troubled mortgage lender, which recently appointed a former director of Barclays as its new chief executive, has also unveiled a reprice of its mortgage range which sees price increases and cuts across its fixed-rate products.
Ron Stout, a spokesman for Northern Rock, says the change to its criteria reflects changes within the mortgage market.
Earlier this year lenders cut back on lending to people with small deposits by introducing tier systems which saw only the people with larger deposits able to benefit from the best mortgage rates. At the same time, lenders withdrew their no-deposit loans, and also stopped lending to people with just 5% deposit to put down.
However, last week Scarborough Building Society announced it started offering mortgages to people with 5% deposits, and Newcastle Building Society hinted that it might follow suit.
At the same time, mortgage rates have been falling back slightly, with Halifax the latest bank to cut its fixed-rate products by up to 0.3%, and some tracker deals by 0.1%.
“We remain in the market, although we are restricted in terms of competitiveness, so we need to be in touch with developments and sit within the pack of competition,” says Stout.
As part of its nationalisation deal, Northern Rock is not allowed to offer market-leading rates on mortgages or savings.
Melanie Bien, from broker Savills Private Finance, says the move is encouraging but will not be enough to help first-time buyers and those without large deposits get on the property ladder.
"Lenders have been putting down their rates but criteria hasn't improved much as yet. Lenders still want quality and margin over quantity, and they think the best customers are those with deposits to put down."
Although people with 25% deposits will benefit from the move, rates have actually increased for people with smaller deposits (see tables below). The products are also only available for new customers.
New purchase customers:
|Two-year||75%||6.39%||6.24% (down 0.15%)
||6.69%||6.54% (down 0.15%)|
|80%||6.69%||6.69% (no change)
||6.99%||6.99% (no change)
|90%||7.19%||7.29% (up 0.1%)
||7.49%||7.59% (up 0.1%)|
|Five-year||75%||6.39%||6.59% (up 0.2%)||6.49%||6.79% (up 0.3%)
|80%||6.69%||6.89% (up 0.2%)||6.79%||7.09% (up 0.3%)
|90%||7.19%||7.49% (up 0.3%)||7.29%||7.69% (up 0.4%)
New remortage customers:
|Two-year||75%||6.49%||6.34% (down 0.15%)||6.79%||6.64% (down 0.15%)|
|80%||6.79%||6.79% (no change)||7.09%||7.09% (no change)|
|90%||7.29%||7.39% (up 0.1%)||7.59%||7.69% (up 0.1%)|
|Five-year||75%||6.49%||6.69% (up 0.2%)||6.59%||6.89% (up 0.3%)|
|80%||6.79%||6.99% (up 0.2%)||6.89%||7.19% (up 0.5%)|
|90%||7.29%||7.59% (up 0.3%)||7.39%||7.79% (up 0.4%)|
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.