Northern Rock raises subprime interest rates

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by Brian Turner

Northern Rock has announced that it raising the interest rates on so-called subprime mortgages by up to 1.25%.

The company will also no longer issue tracker mortgages in the bad credit market that follow the Bank of England’s lead.

The changes will come into effect from August 29th.

The announcement comes as banks and other lenders try to minimise their exposure and risk to defaults in the subprime mortgage market, which has already begun to sink the US mortgage market.

Problems arising from the US subprime mortgage market have already sent tremors through the world’s financial markets, as debt from these loans is often reparcelled with other debts, which are then used as credit against further debt.

While analysts generally believe the UK subprime mortgage market is relatively stable, the problems in America have sent a clear warning to UK financial institutions to minimise risk further.

GMAC, Mortgages UK, and other lenders with majority bad credit mortgage products have already raised their own interest rates on their subprime mortgage products.