Paid by Northern Rock to go away

Published 25th Jan 2010

Northern Rock Asset Management (NRAM), the so-called “bad” arm of the government bank, is quietly offering to reimburse mortgage customers’ early repayment charges if they want to borrow more money with another lender.

The bank is the division of Northern Rock created to separate out mortgages used for risky trades, which eventually led to a run on the bank in 2007.

Northern Rock plc — the “good” arm of the bank — took mortgage customers whose deals were not used to carry out these complex trades. Under the restructuring, implemented this month, NRAM cannot lend more money. The restriction may affect 450,000 customers.

However, Northern Rock confirmed to The Sunday Times last week that any customer who needs to borrow more can do so by moving to a different lender. The charge for leaving a deal early — often several thousand pounds — will be paid by the bank.

The early repayment charge must be paid upfront and will be refunded when customers provide proof that they have borrowed more funds from another lender.

Richard Morea of brokers L&C Mortgages said: “While it is impossible for NRAM to provide further borrowing, it would be grossly unfair for the borrower to be out of pocket.”

Customers may need to borrow at least another £3,000 to benefit from the offer — on top of the cost of the early repayment charge — and act before the end of the year.

Meanwhile, Northern Rock plc launches “everyday mortgages” tomorrow, which have fewer flexible features than its previous fixed-rate deals.

These allow customers to make just 10% of overpayments each year rather than pay off the debt in full.

Source: ' Sunday Times '

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