Sandler: Rock borrowers will struggle to find alternatives

  • Story by: Sharon Flaherty
  • Magazine: FTAdviser
  • Published Monday , May 12, 2008

Ron Sandler, the executive chairman of Northern Rock, today (12 May) admitted that it may be difficult for some borrowers to find suitable remortgage alternatives, as it continues to shrink its mortgage book.

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In a conference call today, he said the bank was in the process of establishing a panel to assist maturing borrowers in searching the market for a new mortgage product.

However, many of the products that offered high loan-to-values (LTVs) have disappeared from the market and continued to do so.

"We are alerting all borrowers that their discount period is coming to an end and guiding them to the panel to get help," Sandler said.

However, he acknowledged that there would clearly be cases where no reasonable alternatives would be available.

He refused, however, to be drawn on how many homes had been 'possessed' in the first quarter, but said that this would be revealed in the half-year treading statement.

Sandler would also not comment on the constituents that make up the panel or its size and said that he may or may not do so in the future.

In the first quarter of 2008, Northern Rock saw a marked increase in arrears levels with mortgages in arrears of three months and over rising from 0.57 per cent in December 2007, to 0.95 per cent at the end of April 2008.

"We are not concerned by this as the credit quality of the book is still in line with the plan," said Sandler.

Mortgage lending totalled only £1.2bn in the first quarter of 2008 with the target being to lend only £5bn annually. This contrasts starkly with full year 2007 when the bank lent £30bn.

Despite this and recent market turmoil, the plan is still for the bank to repay the government loans by the end of 2010.

"Nothing about the market place has been unanticipated and we don’t believe we will have to deviate from the plan," commented Sandler.

The executive chairman also revealed that the construction of the new Northern Rock headquarters, which was in the process of being built when the troubles first hit the lender, is to still go ahead.

"Work is still continuing," he said. However, it has not yet been decided whether the headquarters will be sold off after completion, rented out or used by the bank itself.

Last week, Northern Rock shareholders launched a court challenge, in a bid to win compensation because they believe they lost out as a result of the nationalisation of the bank. (See story.)