Miscalculated Mortgages By Northern Rock
If you took out a mortgage with the lender previously known as Northern Rock back in 2009 or before and you still have the same mortgage now, there is a strong likelihood that your borrowing may be subject to miscalculation due to interest charges being applied incorrectly. This is irrespective as to whether your original mortgage is now operated by Virgin, UKAR (UK Asset Resolution), Landmark (previously NRAM – Northern Rock Asset Management) or Whistletree.
Northern Rock was born out of a vast number of building society mergers and in 1997 it converted to full banking status. The early 2000’s saw a massive upsurge in lending and very quickly Northern Rock become one of the top five mortgage lenders in the UK. Their “Together” mortgage saw the bank gain huge notoriety, and not all of it positive. Nevertheless, lenders such as BM Solutions and Alliance and Leicester scrambled to put similar mortgage propositions in place.
Record levels of mortgage lending were funded by borrowing on the money markets and then packaging and selling the loans on as bonds to investors. In late 2007, the unthinkable happened. Nobody wanted to buy these “Granite Bonds” and Northern Rock hit the wall in spectacular style with it falling into public ownership in February 2008.
Their “Together” proposal was innovative and allowed the borrower to take a 95% mortgage secured on the property with up to a further 30% (capped at £30,000) added alongside as an unsecured loan which was at the same rate as the mortgage borrowing. In times of huge house price growth, it allowed borrowers to bid substantially more than valuation to secure a property with the added ability of being able to also roll up three existing debts into one easy monthly payment.
Many customers sought to try and remortgage away in order to achieve a better rate on the secured portion of the borrowing. This meant leaving the unsecured element with Northern Rock. An expensive trade off was losing the preferential rate on this portion. In the early years, Northern Rock priced this retained borrowing at 3% over their variable rate, but this margin was rapidly increased firstly to 5% and then to 8%. With a current Standard Variable Rate of 4.79%, some borrowers in that situation can be paying as much as 12.79%. A small fortune in times of record lows on interest rates.
Northern Rock were keen to innovate their product range. Fully flexible mortgages allowing mortgages holders to reduce their balance to as little as a £1 and then borrow all the way back up again were heavily pushed. No further underwriting on the future borrowings was a recipe for disaster.
They also came late and aggressively into the Buy to Let market. A deposit of as little as 15% was enough to secure your investment property. They laterally offered lifetime tracker rates on Buy to Let borrowing and with wafer-thin margins too. It was financial suicide and finally on 14 September 2007, the run on the bank started. The rest, as they say, is history.
We can also offer to audit any mortgages taken with Northern Rock after 2000 and for a minimum starting balance of £100,000, providing that they were then repaid no less than 7 years later.
For more information on how to receive our entirely free mortgage audit, please contact Beat the Banks on 01382 200474 or for free on 0800 193 1234. Or if you live locally, why not simply pop into our office with any of your mortgage paperwork and we can start the audit process immediately. Our hours are 8am-8pm weekdays, except for Fridays when we close at 6pm. On Saturdays it 10am-2pm.