Northern Rock halves redemption rate to free up housing market

Posted under General by Jermaine

Satisfied with the nationalised Northern Rock bank’s repayments of £26.9bn loan, which are ahead of schedule, Chancellor of Exchequer, Alistair Darling allowed it to slash mortgage redemptions rates of home loans from 60% to 30% for existing customers who would seek renewal of their loans.

Northen Rock had been shrinking its activities and encouraging borrowers to go to other lenders. But the government is now attempting to free up housing market by making more availability of fund to borrowers.

Beneficiary of the change will be current customers only. They will now be able to stay with Northern Rock. Reduction in level of redemptions will help Northern Rock to slow down repayment of its government loan.

Many banks were finding it difficult to provide higher amount of loans to their customers due to heavy flow of borrowers who had started leaving Norhern Rock. But industry experts are now anticipating that mortgage finance from those banks will be available to aspiring home buyers more freely and easily.

According to Sue Anderson of the Council of Mortgage Lenders, other lenders were showing less interest in offering new loans to customers as they were trying to absorb Northern Rock’s mortgages. It is expected that Northern Rock’s move would create positive impact on the UK’s housing market.

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