Northern Rock Have a Plan of Action For Boosting the Remortgage Market

Northern Rock, a financial organisation and mortgage lender in the UK, are planning to change their remortgage contracts. This news comes after a government policy was announced that is being designed to increase lending for commercial property purposes in the UK. Those with commercial mortgages will now be able to remain with NR, while the lender at the same time will be continuing on with state loan repayments.

The lender has made changes to their remortgage contracts in recent weeks. This is in an attempt to reduce the amount of new mortgages on their books, and this will now be done at a slower rate than they had previously stated.

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 most fundamental features of this change of course will involve Northern Rock being less harsh in their approach to present customers who have fixed remortgage rates. It is these customers who would have normally been offered incentives to switch their provider. The move is partially down to the European Union’s planned goal of meeting state aid rules.

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.

The lender states that this has been a positive strategy, which has enabled it to comfortably stick to agreed goals for paying back government bailout cash ahead of the originally agreed deadlines.

Northern Rock has recognised the degree of public anger since its 2008 bailout and has tried to demonstrate some degree of social and political conscience. The strategy, which supports both its customers and the wider economy, is designed to reflect this.  It will mean slower repayments of bailout loans though the Building Society says it is still on track to meet its obligations, even with this new strategy.

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.

Whilst the change of strategy should benefit the UK lending market, Northern Rock were quick to point out that they will continue to meet targets for repaying government loans. This is in a market where remortgaging has reached the lowest level for ten years, with the Council of Mortgage Lenders reporting consecutive monthly declines in remortgage approvals of up to 20 per cent.

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.

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