Northern Rock borrowers face big jump in mortgage repayments

June 30 2008 - Hundreds of thousands of Northern Rock borrowers are facing huge rises in their monthly mortgage repayments because they are trapped in deals with the beleaguered lender.

In line with the business plan adopted when Ron Sandler was appointed chairman almost four months ago, the bank has scrapped attractive rates and tightened lending conditions to deter new customers and encourage existing ones to remortgage elsewhere.

However, not all customers have the option of leaving the nationalised lender. About 200,000 customers took out Rock’s Together mortgage, which enabled homeowners to borrow up to 125 per cent of their property’s value. As the credit crunch has worsened, lenders have pulled their most generous deals, leaving cash-strapped borrowers with nowhere to turn. Few lenders now offer deals above 95 per cent of a property’s value and those that do are extremely uncompetitive.

This leaves thousands of Together customers with little option but to move on to the bank’s standard rate of 7.49 per cent at the end of their fixed-rate deals. A homeowner who took out a £150,000 fixed-rate loan with Northern Rock at 6 per cent will see their monthly repayments rise by £186 on the bank’s standard rate. Melanie Bien, of Savills Private Finance, a broker, said: “Unfortunately, people with 100 and 125 per cent loans who are coming to the end of the fixed-rate don’t have much choice.”

Northern Rock borrowers face big jump in mortgage repayments
James Charles | The Times