The Northern Rock debacle threatens thousands of homeowners with a significant rise in mortgage repayments, according to Moneynet.co.uk.
The news follows yesterday’s announcement that Northern Rock is withdrawing its Together range, which offers a combined mortgage and personal loan aimed at first time buyers.
Moneynet.co.uk says Northern Rock’s desire to get rid of non-conforming customers will mean many will be unable to remortgage elsewhere or will be forced onto the expensive Standard Variable Rate (SVR).
The website claims many customers with a history of adverse credit, high loan to value or with self-cert incomes will not be able to renew their mortgage at Northern Rock when their current deals expire.
Richard Brown, chief executive of Moneynet.co.uk, says: “Unless [Northern Rock borrowers] can persuade a different lender to offer them an affordable alternative, thousands could face losing their homes when their fixed rate deal reverts to Rock’s SVR.
“Some of those customers who don’t fit standard lending criteria – the kind of borrower Northern Rock was happy to take on before the crisis began – are likely to have many doors shut in their faces by other lenders in the current economic climate.”
According to Moneynet.co.uk, a borrower with a £200,000 interest only loan at 5.19% will face a monthly repayment hike of almost 50% if they revert to Northern Rock’s SVR of 7.59%.
The website suggests that Northern Rock’s recent advice to customers, suggesting they speak to an IFA to find them a better deal, indicated it is trying to offload customers it no longer wants.
Brown says: “This is a catastrophe not just for those borrowers at the margins of affordability but also for those loyal customers of several years standing who have never missed a payment,”
He suggests lenders speak to an IFA or broker to help them cope with the radical change in their financial circumstances as a result of tighter lending criteria.
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