The Government is desperate to unclog the mortgage market.
With that aim in mind, Chancellor Alistair Darling has announced that nationalised bank Northern Rock will be slowing down its rate of mortgage redemptions.
Redemptions are the point at which borrowers are encouraged to seek new lenders, at the end of their fixed rate period.
Northern Rock was bailed out by the Government in February 2008. At the time 60 per cent of its customers were advised to find a new lender when their fixed rate deal came to an end.
Brokers were employed to find new mortgage lenders for Northern Rock customers. The purpose was to generate cash for Northern Rock, so that it could start to repay its loan.
Northern Rock?s target has now dropped to 30 per cent with the express aim: ?to support Government policy to increase mortgage lending capacity in the market.?
The change in target only affects current customers, and the result will actually be that Northern Rock will only be able to pay back the loan to the Government at a slower rate.
There has been no announcement about any change in interest rates for either new or current customers.
Industry watchers are hopeful that the move will help to get the mortgage market moving once again. The efforts of Northern Rock are a good start, but other lenders also need to be more encouraging to new buyers.
