Northern Rock to offer property loans up to 90%

Posted under General by Jermaine

Government-owned Northern Rock, aiming to kick-start lending, is going to offer mortgage loans of up to 90% of property value to the struggling first-time buyers.

Northern Rock had faced severe criticism for irresponsible lending when it started offering 100% mortgages.

After nationalisation of the bank last year, it tried to run down mortgage book with extra cash from taxpayers. Northern Rock is now reviving its lending. It intends to lend extra £5 billion in mortgages in 2009 and plans to enhance it to £9 billion from 2010.

First-time buyers, who were finding it etremely difficult to get onto property ladder due to demands by banks for hefty deposit, would welcome Northern Rock’s move wholeheartedly. The average deposit requirement is currently 22%, which is by far highest in last 34 years.

According to Chancellor Alistair Darling, initiative of 90% mortgage from Northern Rock is one of many measures being initiated by the government to rebuild banking system.

Prime Minister Gordon Brown had already announced over the weekend that he would soon be calling for a ban on 100% mortgages. He has written to the Financial Services Authority to urgently investigate ways to ban these mortgages permanently.