July 30 2014 Latest news:

Northern Rock, the mortgage lender whose collapse three years ago was one of the most iconic moments of the banking crisis, has said it will once again lend up to 90pc of a property’s value to homeowners.

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The news is one of the clearest signs yet that the sector thinks the worst of the turmoil is over, but the move could still prove risky given that many commentators see the housing market as remaining depressed in the short term.

Northern Rock said the new mortgages would be aimed at helping first-time buyers and would be available with rates starting at 5.99pc.

Andy Tate, Northern Rock’s customer and commercial director, said: “Our new products, which will be offered within our prudent risk appetite and only to customers with good affordability, should appeal to those who have lower deposits and first-time buyers.

“First-time buyers are important to the housing market. Having listened to those customers, we have developed a service that not only helps them to arrange the right type of mortgage that they can afford but also supports them through the various steps in the process.”

Northern Rock was rescued by the taxpayer in 2008 after the failure of its aggressive lending practices, which had included its Together mortgage range. Those products offered borrowers loans of up to 125pc of the value of their homes.

The bank also relied heavily on funding from the wholesale lending markets. When those markets froze at the onset of the credit crunch, and falling house prices led to a growing number of people with loans greater than the value of their homes, Northern Rock collapsed.

Pictures of savers queuing round the block to withdraw their cash provided some of the most recognisable images of the financial crisis.

Now, however, the bank is looking to return to private ownership, and investment bank Morgan Stanley is advising it on its options. Analysts believe that its return to riskier lending is part of a drive to boost profitability and make it more attractive to potential buyers.

Andrew Hagger, of Moneynet.co.uk, said: “No doubt this move will raise a few eyebrows and some comments of ‘Here we go again’, in reference to the days when Northern Rock was lending at 125pc loan-to-value (LTV).

“But there is no problem with 90pc LTV lending as long as a thorough credit assessment is undertaken to prove that the borrower can comfortably afford the repayments.

“The biggest obstacle to many first-time buyers has been trying to raise 20pc deposits to get on the housing ladder, so this move will be welcomed by some.”

He added: “With banks having to put aside far more capital on higher LTV mortgage products, there isn’t going to be a large volume of 90pc LTV business written.

“However, it’s welcome news that Northern Rock and a few other lenders are at least now prepared to consider applications from those with just 10pc stakes.”

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