Norther Rock pricing theselves out of the market?

jane.canterbury

A question on behalf of my sis.

Her NR 2yr fixed rate ends in a couple of months (4.9%).

They have informed her that their fixed rate deal will be 'just 6.99%' :shocked:

Now would it be very cycnical of me to think that they are desperate to get some cash back in and would therefore be quite happy for her to move her mortgage?

And are they allowed to just name their price?

She's going back to her trusted IFA for further advice but I wondered if anyone else had had this with NR?

TIA

Jane

Gorgeous_George

NR cannot afford to take any risks. Their new products will be priced such that they make a profit even when their own borrowing rates have increased.

If your sister is free to move it´s her choice whether to do so or not - providing her LTV isn´t too bad. I´m sure that there´ll be better rates around and maybe a Base Rata Tracker would be worth considering. Please ask her not to fix for two years as she´ll be looking to move again before she knows it.



GG

John_3:16

All depends if she can move on or what the variable rate is?
As far as i know se has not got to take the fixed rate?

jane.canterbury

Thank you both.

No, she will not be taking it, it just seemed such a huge leap (and bloody unfair to my mind.

She's over 15% equity and a fabulous credit rating, but it is self cert so I guess that's why. Not sure if any others offer that now.

thanks again

Jane

alexandlee

Bear in mind wherever she goes that base rate 2 years ago was 4.5%, thus her rate then was 0.4% above base.
Today that would be 6.15% - quite a rise in anyone's book.
Self cert will make rates higher
She does not have to stay with NR beyond her benefit period

MarkyMarkD

It's not "bloody unfair".

NR are short of funds to the tune of between £25 and £30bn (the amount they currently owe the government).

There is no point in them seeking to lend money to ANYBODY right now. So the only people they are lending money to is people who are willing to pay VERY high rates.

NR (and any other lender, for that matter) are not obliged to allow customers to switch products.

The original loan the OP's sister took out was not a 2 year mortgage. It was a 25 (or whatever) year mortgage, where 2 years were at a fixed rate and the other 23 were at a variable rate.

What she is seeking to do is to change the contractual arrangement she made with the lender, at the 2 year point. The lender can choose to allow you to do that - at a price - or they can say no. It's up to them.

dunstonh

bloody unfair to my mind.

Thats daft. If fails to take into account interest rate rises and how NR are buying the funds to secure their rates at present and the amount they are paying for doing so.

Interest rates are higher today than 2 years ago. The decision to go with a 2 year fixed rate was daft. 5 years would have been far more sensible.

John_3:16

I agree to some point Mark. But wonder if she had a bnefit period. taking a fixed rate may not have been a benefit? ( although it was not you who called it a benefit)However I would be surprised if she has not been tied in for 5yrs

MarkyMarkD

I don't think the OP is talking about an extended tie. If they were, then NR wouldn't be offering them 6.99% either but telling them they have to pay SVR or an enormous Early Repayment Charge.

jane.canterbury

The bit I don't 'get' is that sis is no greater risk now than she was when they chose to lend her the money. I am well aware of the rise in interest rates but the rise on their fixed deal is completely disproportionate to that.

She has never even been late on a payment and yet is being penalised because NR have got themselves in the mire. It seems unfair to have said 2 years ago, you are this much of a risk, so you will pay x over the odds for your fixed rate, and to then say oh actually we're running a bit short of funds so we'll screw you for some more.

Thanks

MarkyMarkD

What you don't get, Jane, is that they are not seeking to "screw her for some more". They are perfectly entitled to earn a profitable return on their funds.

If they are borrowing from the Bank of England at 7%, they pretty obviously aren't screwing her by seeking a rate of 6.99% fixed.


They are trying to deter borrowers who are going to lose them money. And she would lose them money if she paid them less than the 6.99% they've offered.

As I said before, lenders are not obliged to offer any existing borrower any sort of change of product. You sign up for a 25 year mortgage (typically), not a 2 year one with an option to renew.