Northern Rock to offer 90% mortgages.

A report in the Financial Times today says that Northern Rock, who collapsed three year's ago and was bailed out by the Government,  is about to launch a range of mortgages offering up to 90% of a property's value. 

Apparently the new high loan-to-value mortgages might be available as early as Monday next week and the move is believed to be an attempt to boost revenue before returning to private owenership.

The agressive lending practices employed by Northern Rock, which included the Together mortgage which offered borrowers up to 125% of their property value, caused one of the most high-profile failures of the financial crisis.

More recently Northern Rock has restricted the loan to value it offers customers to 85%.  The decision to increase this to 90% comes as it looks to higher margin lending to drive up profitabiolity and boost its attractiveness to buyers.

Higher loan-to-value mortgages command greater margins due to the added risk of losses if house prices fall.  While potentially more profitable, these mortgages are mor risky particularly in the current climate where house prices are facing downward pressure.  The lower amount of equity means there is a smaller buffer to soak up house price falls.

Other banks, including HSBC and Santander, have been quiety returning to the high loan-to-value market but few are offering up to 90%. 

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