Press
Rock to push ahead with lending despite arrears rise
by David Pawsey
FinancialAdviser 30th April 2009
Northern Rock still intends to increase its lending capacity despite seeing a further increase in mortgage arrears in this year's first quarter.
In February the lender announced its intention to resume new lending, which in some cases it said would result in offering 90 per cent loan-to-value mortgages
Northern Rock's latest figures revealed that 3.67 per cent of its mortgages had fallen into three months' arrears as of 31 March. This had increased from 2.92 per cent at the end of December 2008.
However, the lender claimed it had "noted some signs of improvement" in early arrears trends as a result of its debt management procedures.
Gary Hoffman, chief executive of Northern Rock, said: "At Northern Rock we remain committed to working with all our customers and to assist those who may be under pressure financially, providing the best possible support we can in all circumstances.
"We have invested heavily in our debt management activities and are beginning to see some signs of improvement in early arrears. We have also announced this week that we are one of the first lenders to join the Homeowner Mortgage Support Scheme, which will serve as an additional tool to help customers facing financial difficulty to remain in their home."
Stating a commitment to increase the flow of credit to the mortgage market, Northern Rock said all new lending would be responsible, carefully underwritten and in the tax payers' interest with affordability for customers remaining a key consideration.
While gross mortgage lending in the first three months of 2009 totalled £550m, his figure did not yet reflect the impact of planned increases in mortgage lending, according to the results.
As a result of more competitive products being launched, Northern Rock said it had seen applications increase by 70 per cent in March, compared with the previous month.
The nationalised bank stressed new lending was of a low-risk nature with the average loan-to-value for the first quarter standing at 48 per cent. James Carter, principal of London-based IFA Independent James, said: "It does makes sense because if they do not get good quality business on their books they are going to be left with a top heavy book of Together clients, high LTV clients."So they will have to lend and lend to good quality and I know they are placing more and more emphasis on credit scoring.
"If the government is saying we want banks to lend more, then they have go to do it through those banks they have a stake in, in the hope everyone else follows."