Northern Rock To Start Offering Loans Once More
It has been a couple of years of turmoil for Northern Rock, with their situation changing dramatically on a regular basis.
Firstly, the lender was nationalised back in 2007, following the collapse of the bank, with an injection of cash from the Government of £27 billion in the form of a loan. Since then Northern Rock has been trying to repay their loan, quite successfully, by effectively withdrawing from the homeowner loan market and reducing the balance of outstanding homeowner loans on its mortgage book.
Last year, Northern Rock had the highest number of repossession cases of any lender and encouraged many other borrowers to remortgage elsewhere in order to reduce its outstanding debts.
The high level of repossessions could possibly be explained by the high loan to value ratio’s which were previously offered by the bank, often in excess of 100 per cent loan to value. Either way, the lender has been fairly ruthless in its approach to reducing its own loan balance, which it has now reduced to £9 billion. In view of this success, Northern Rock controversially paid bonuses out to members of staff recently, although this excluded executives at the bank.
The latest announcement from Northern Rock is that it will now return to the lending market, offering homeowner loans to individuals once more.
The government has said that the lender will be offering £14 billion worth of new loans over the next two years, with £5 billion being made available this year and a further £9 billion in 2010.
Hopefully Northern Rock will have learned from previous mistakes and take a more prudent and responsible approach towards lending this time, checking potential borrowers more stringently and offering more cautious loan to value ratios.
Either way, this has got to be good news for the housing and homeowner loan markets which require this type of funding to provide a boost and enable potential borrowers to obtain the loan they require to get onto the property ladder.
