Northern Rock borrowers trapped on expensive rates
Mortgage customers of Northern Rock who are seeing their fixed-rate mortgages run out are facing huge increases because they are trapped on expensive rates with the crisis-torn lender.
The business plan for the nationalised bank saw attractive rates scrapped in an attempt to put-off new customers and encourage existing ones to re-mortgage with another lender.
Those who borrowed 100% of their property’s value will be worst hit as these types of deals are no longer on offer as a result of the credit crunch.
Around 200,000 people signed up for Northern Rock’s Together mortgage product, which enabled them to borrow up to 125% of their propertya��s value.
Very few lenders now offer deals over 95% of a property’s value while those that do are extremely uncompetitive.
For those who do not have the funds required to fill the gap between their old fixed-rate mortgage and a re-mortgage deal, will have little or no choice but to stay with Northern Rock on its interest rate of 7.49%.
At the beginning of last month, Northern Rock announced a deal with Lloyds TSB to give its customers a re-mortgage deal.
However, Lloyds TSB accepts applications only from Northern Rock customers who hold at least 20% equity in their homes. Lloyds has been criticised for only accepting customers who are low-risk.
Newcastle-based Northern Rock was taken into public ownership after the Government rejected takeover bids from the board of Northern Rock and a consortium led by Sir Richard Bransona��s Virgin Group.
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