Return of the 90% mortgage from Northern Rock

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by Kay Murchie

In a bid to kick-start lending, Government-owned Northern Rock is set to return to the mortgage market offering loans of up to 90% of a property’s value.

In the past, Northern Rock has been criticised of irresponsible lending after offering 100% mortgages.

Following its nationalisation a year ago, the strategy was to run down its mortgage book but with extra cash from the taxpayer, it will now revive its mortgage lending.

The Newcastle-based bank is aiming to lend an extra £5 billion in new mortgages in 2009 and up to £9 billion from 2010.

The move will most certainly be welcomed by first-time buyers who have been unable to get onto the property ladder unless they come armed with a hefty deposit.

A recent survey from the Intermediary Mortgage Lenders Association revealed that 58% of first-time buyers are locked out of the market since only those with a hefty deposit are able to get a foot onto the property ladder. The average deposit now required is 22% - the highest in 34 years.

Chancellor Alistair Darling said the 90% mortgage from Northern Rock is one of a series of measures being implemented to rebuild the banking system.

Over the weekend, Prime Minister Gordon Brown announced he was calling for a ban on 100% mortgages.

The Prime Minister has written to the Financial Services Authority requesting an urgent investigation into how these mortgages can be banned permanently.