NORTHERN Rock has unveiled a tie-up with Lloyds TSB under which some of the nationalised bank's mortgage customers will be able to switch to Lloyds when they are coming to the end of their fixed-rate deals.
Under the terms of the three-year deal announced yesterday, qualifying customers will be offered the chance to apply for a fixed-rate loan with Lloyds.
Customers moving to Lloyds will have access to its full range of two, three and five-yea
r fixed-rate mortgages.
Rates on these are currently 5.99 per cent, 6.09 per cent and 6.14 per cent respectively, all with an arrangement fee of £995. Application, legal and valuation fees will be waived – as they would be when moving to another Northern Rock deal – while successful applicants will also be fast-tracked.
Northern will be paid a commission fee for each customer switching to Lloyds.
Northern said the deal would safeguard 100 jobs at the bank, as staff would be needed to run the switching service, which should be operational by the beginning of July.
The group said the move was consistent with its aim of repaying the £24 billion it owes to the Bank of England by reducing the size of its mortgage book.
The deal is open only to Northern customers who have a maximum loan-to-value (LTV) ratio of 80 per cent and a clean repayment history, and there is no guarantee that applications will be accepted by Lloyds.
Customers who do not want to take advantage of the offer will be able to remain with Northern or take out a mortgage with another provider.
Those customers not taking up the Lloyds offer or falling short of the bank's criteria will be encouraged to move onto Northern Rock's standard variable rate – currently an uncompetitive 7.49 per cent – or switch to another provider.
Analysts said yesterday that, with Northern having a particularly large number of borrowers with high LTVs, many customers will be forced to go to other lenders. And those with attractive credentials might do better than Lloyds deals anyway.
Darren Cook, head of mortgages at Moneyfacts, said: "Lloyds will be cherrypicking the lowest-risk customers with the cleanest records and lowest LTVs, and they are the ones who can get a better deal elsewhere at the moment."
Ron Sandler, executive chairman of Northern Rock, said: "This is a very positive development for Northern Rock. We have already reported solid progress against our business plan, including meeting our planned target for mortgage redemptions, as we continue to repay the Bank of England facility."
Lloyds, which has an 8.5 per cent share of the mortgage market, said the deal would enable it to accelerate its mortgage growth in a low-risk way.
Helen Weir, executive director of UK retail banking at Lloyds, said: "This is an innovative example of how we continue to deliver on our organic growth strategy and maintain the high quality of our mortgage book."
The full article contains 510 words and appears in The Scotsman newspaper.
