UK bank to expand its mortgage lending
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The Associated Press
Oluşturulma Tarihi: Şubat 24, 2009 00:00
LONDON - Nationalized lender Northern Rock said yesterday it will increase its home loan business, part of the British government's effort to stimulate the country's depressed housing market.
The company said it would make 5 billion pounds ($7.2 billion) in new mortgage lending available this year, and between 3 billion pounds and 9 billion pounds in subsequent years. Northern Rock said the new lending will be financed partly from deposits and repayments on existing loans, and partly through government support - an increase in the government's loan and a looser repayment schedule of the state aid.
"The new lending will be made on commercial terms to ensure that it represents good value for money for the taxpayer," the company said. "To enable Northern Rock to focus on new lending, the company will be restructured so that the back book of mortgages is managed separately to its other business," it added.
The new mortgage lending will mean that Northern Rock will not repay its government loans as fast as planned. "We were asking it to repay the total loan that we made to it, which was about 27 billion pounds," said Treasury chief Alistair Darling. "So what is happening is that the rate at which they pay us back will slow down."
Analysts said the increased lending was a positive step, but warned that the impact may be relatively limited. "Rightly this news should be welcomed even though this is a small fraction compared to what was being made available to mortgage borrowers a couple of years ago," said Howard Wheeldon, senior strategist at BGC Partners in London. "Assuming that there are those that would wish to take the opportunity of borrowing in this new age of responsible lending and that they are now able to put down a reasonable deposit we should see this as a start in the right direction," Wheeldon said.
Treasury chief Alistair Darling said the bank, which was taken over by the government last year, would not be lending the full value of a home. "Northern Rock is not going to do 100 percent. They had their fingers very badly burned and, rather more importantly, a lot of their customers had their fingers very badly burned," Darling said in an interview with BBC radio. "They can go up to 90 percent but they will have to take that judgment on the individual circumstances." Darling added that the increase in lending at Northern Rock should be weighed "against a background where a lot of the foreign-based banks have withdrawn."
"The new lending will be made on commercial terms to ensure that it represents good value for money for the taxpayer," the company said. "To enable Northern Rock to focus on new lending, the company will be restructured so that the back book of mortgages is managed separately to its other business," it added.
The new mortgage lending will mean that Northern Rock will not repay its government loans as fast as planned. "We were asking it to repay the total loan that we made to it, which was about 27 billion pounds," said Treasury chief Alistair Darling. "So what is happening is that the rate at which they pay us back will slow down."
Analysts said the increased lending was a positive step, but warned that the impact may be relatively limited. "Rightly this news should be welcomed even though this is a small fraction compared to what was being made available to mortgage borrowers a couple of years ago," said Howard Wheeldon, senior strategist at BGC Partners in London. "Assuming that there are those that would wish to take the opportunity of borrowing in this new age of responsible lending and that they are now able to put down a reasonable deposit we should see this as a start in the right direction," Wheeldon said.
Treasury chief Alistair Darling said the bank, which was taken over by the government last year, would not be lending the full value of a home. "Northern Rock is not going to do 100 percent. They had their fingers very badly burned and, rather more importantly, a lot of their customers had their fingers very badly burned," Darling said in an interview with BBC radio. "They can go up to 90 percent but they will have to take that judgment on the individual circumstances." Darling added that the increase in lending at Northern Rock should be weighed "against a background where a lot of the foreign-based banks have withdrawn."