Northern Rock To Offer 90 Per Cent Loan To Value
Northern Rock hit the news headlines three years ago, when it became the first high street bank which needed to be bailed out with a government loan in order stop the lender from going under.
Many experts believe that the failure of the bank was largely due to the bad loans it had taken on in previous years and particularly those loans with a high loan to value, with many customers borrowing up to 125 per cent loan to value.
But today, Northern Rock is back in the news once again, as it has announced that it is to launch a new home owner loan product which offers borrowers up to 90 per cent loan to value. Since the financial crisis, the lender has restricted its loans to just 85 per cent loan to value.
Northern Rock received a loan of £3 billion from the taxpayer, back in 2007 and since then it has been forced to maintain high levels of liquidity through cash reserves in order to protect its outstanding loans and the possibility of another run on the bank.
Despite the fact that Northern Rock made a loss of £140 million last year, the regulator has allowed it to start offering the high loan to value products once again, although clearly not to previous levels of 125 per cent loan to value.
It is expected that there will only be a limited level of funding to support the new loan product and therefore, once this has dried up, the product could be withdrawn once again.
Northern Rock has also been allowed to buy back some of its previous home owner loan book, although the majority of the bad loans which were offered by the lender in the past, have been taken over by the government.
