Rock in mortgage deal with Lloyds

Published 06th Jun 2008

Lloyds TSB has reached a deal so that Northern Rock mortgage customers coming to the end of their fixed rate deals will be encouraged to switch to it.

Selected customers will be sent letters and brochures from Lloyds and will have the standard application fee waived.

Since nationalisation Northern Rock has made it clear that one of its aims is to reduce the size of its loan book.

Lloyds TSB will pay a commission to Northern Rock for each customer who switches to it.

If they do not want to take up the offer, customers can instead go onto Northern Rock's standard variable rate (SVR) or switch to another provider.

"The new mechanism to support customers transferring their mortgage to Lloyds TSB is a welcome move," said Moneyfacts.
"It comes hard on the heels of the doubling in size of Northern Rock's debt management team to assist those who don't meet Lloyds TSB's criteria," the financial information service said.

Warning

Northern Rock's financial crisis has forced it to charge a higher than average rate for its SVR mortgages, partly as a way of encouraging customers to redeem their home loans and leave.

For several months it has been writing to its customers, and in some cases contacting them by telephone, to warn them that it is unlikely to offer them a good deal when their current package expires.

In April another bank, HSBC, made an attempt, in part, to lure Northern Rock customers when it launched a "rate-matcher" offer, aimed at anyone whose fixed-rate deal at another lender was expiring.It said it would take them on at their current rate for a further two years.However, customers had to put down a minimum 20% deposit and pay a fee.

Nationalised

The deal between Lloyds TSB and the Northern Rock will last for three years.

Northern Rock was nationalised in February and has since said it will cut about 2,000 jobs by 2011 and reduce its residential mortgage lending by half.

The European Commission is currently investigating the legality of the government's involvement.

On Wednesday, the commission invited comments from interested parties on Northern Rock's bail-out, giving them a deadline of 3 July.

Source: ' BBC '

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