subject: Northern Rocks Bold Plan To Jumpstart The Remortgage & Commercial Mortgage Market [print this page] Building society Northern Rock has announced changes to its remortgaging policies, which will support the latest treasury policy to boost commercial lending. This should result in greater numbers of mortgage customers being able to remain with the company of their choice while still repaying the government loan that bailed out the building society, ahead of previous projections. This step has been brought about due to government aims to gradually pace the number of remortgages flooding into the financial markets, threatening another unsustainable boom.
The bank was one of the first to suffer in the global financial crisis and Northern Rock recently announced changes to its remortgage strategy. Rather than quickly reducing the number of mortgages on its books, the Newcastle based bank is now planning to retain more customers and reduce its loan portfolio at a slower rate.
This new move by Northern Rock will see an increase in the amount of remortgage funding it is lending out, but with less 'new' contracts which they hope will help the UK economy to grow at a more stable rate.
One of the main changes to the bank's approach will see them being more sympathetic to existing borrowers. Rather than offering incentives and encouraging their borrowers to remortgage to another lender when their Northern Rock deals expire, the company will be less aggressive towards these customers.
The hope is that this new plans will help the recovery of the mortgage markets, and the lender has stated that the repayment of state money was its most important goal for the foreseeable future.
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 has regained some faith since it has shown an interest in the bigger picture and in the health of the UK economy. Although the repayments on loans from the government will remain relatively slow, they feel that they are now in a far more stable position than previously.
A spokesperson from NR stated that they have seen a significant drop in mortgage redemptions, which allows for a more healthy income which may help them to increase their government loan repayments in the future. They also confirmed that the new remortgage strategy did not affect other areas of Northern Rock.
Northern Rock is also keen to emphasise that the government backing for the society remains and that it will stick to all previous targets for bailout loan repayments. In the last financial year, remortgaging has decreased to the lowest level in a decade, claims the Council of Mortgage Lenders, with worryingly high consecutive monthly decreases, sometimes as much as 20% being recorded in the market.
The decision by Northern Rock to retain more of their borrowers will come as a blow to mortgage brokers who were already facing a slow market. With fewer Northern Rock borrowers to advise, remortgage numbers may be set to fall again. With lenders still reluctant to lend and many people paying record low rates on their mortgages, it seems unlikely that there will be a sudden increase in demand for remortgages in the near future.
by: Howard Ogollegos
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