Northern Rock Home Loans with Crippling Rates of 13%; When the Government Bailed out the Failed Bank, Customers Thought They'd Get Help Too. How Wrong They Were!

Daily Mail (London), October 1, 2014 | Go to article overview

Northern Rock Home Loans with Crippling Rates of 13%; When the Government Bailed out the Failed Bank, Customers Thought They'd Get Help Too. How Wrong They Were!


Byline: Ruth Lythe

HOMEBUYERS who took 125 pc mortgages with failed bank Northern Rock are today being forced by the Government to pay interest as high as nearly 13 pc.

These forgotten victims of the banking crisis are being left stranded -- they can't move home and are unable to take a cheaper mortgage deal -- because of the eye-watering interest rates being imposed on them.

Those affected are borrowers who took out the now-infamous Northern Rock Together mortgage.

This allowed buyers to purchase a house without a deposit, take loans up to 25 pc more than the value of their property and borrow up to six times their income.

The Government bailed out Northern Rock in 2007 and split it into two. Many of the Together loans were considered high risk and taken over by a new state-owned business called Northern Rock Asset Management.

Today, Money Mail can reveal that, almost exactly seven years later, these customers face being made to pay crippling rates of interest. They feel as though they are getting no help from a bank that, while relying on taxpayers' cash to stay afloat, is doing nothing to help them stay in their homes.

Karen Hazlett is among those paying interest of 12.79 pc on her Northern Rock loan. The 44-year-old hairdresser took out a Northern Rock mortgage in 2006.

At the time she was renting in her home town of Barrow-in-Furness, Cumbria, following a relationship break-up and struggling to save for a deposit. House prices were soaring and every month a property seemed further out of her grasp.

Then a mortgage adviser told her there was no need to save -- she could borrow the full cost of the PS75,000 two-bedroom house she wanted. Karen signed up for the Together mortgage. She borrowed PS83,000 in total -- a PS67,500 mortgage and a PS15,500 personal loan. Over the first five years she paid interest at 5.89 pc; this later dropped to 4.79 pc when her original deal was over and she moved on to the bank's standard variable rate.

But after interest rates plunged, Karen shifted the mortgage part of her loan to a cheap fixed-rate deal with Nottingham Building Society in 2012.

At this point, Northern Rock wrote to her to say that because she had switched the mortgage away from the bank, it was entitled to hike the interest rate on the personal loan component -- and her interest rate would jump from 4.79 pc to 12.79 pc.

Monthly payments doubled from around PS90 to PS164. She says she has tried repeatedly to switch the loan to a cheaper deal with another bank, but has been turned down. The best personal loan rate on the market is currently around 4 pc.

Karen says: 'When all is said and done, this bit of Northern Rock is Government-owned and bailed out by taxpayers. It should not be profiteering from people who are struggling. I just have no idea how they sleep at night.

'I owe this money, so I will pay it off, but feel I should be able to do so at a reasonable rate. Some people might say I was stupid ever to take out this mortgage, but at the time what choice did I have?' The Northern Rock Together deal was one of a number of mortgages that allowed buyers to take on loans for several times their income without a deposit.

They were flogged in the years preceding the banking crisis by brokers and bank sales staff living in the never-never who believed house prices would continue rising and easy credit would always be available.

The Together deal was made up of a mortgage worth 95 pc of the value of a property, and a personal loan worth up to another 30 pc. This was capped at PS30,000. Buyers could borrow 5.9 times their income.

The idea was that buyers with no deposit could borrow more than their property was worth in order to make home improvements and buy furniture. They were popular among first-time buyers and those who were on low incomes or starting out again after divorce. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Northern Rock Home Loans with Crippling Rates of 13%; When the Government Bailed out the Failed Bank, Customers Thought They'd Get Help Too. How Wrong They Were!
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.