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UK government relax payment terms for Northern Rock

It has today been announced that the UK government has relaxed the payment terms afforded to the Northern Rock regarding a £26 billion loan from the UK taxpayer. This significant U-turn will allow Northern Rock to slow the rapid decline in its mortgage book and offer competitive mortgage services to UK property buyers. It is hoped that the move will instil more confidence and competition into the sector and lead to others following suit.



The U-turn by the government has surprised many in the industry as Northern Rock were seen as something of a busted flush and a business which was in severe wind down mode. The business has attracted a lot of criticism with many suggesting that it will not be able to repay the £26 billion loan in full. The relaxation of the payment terms is something of a double edge sword as it should assist in stabilising the UK property market although taxpayers will have to wait substantially longer for repayment of the loan.



As the UK government has a significant interest in Northern Rock, Bradford & Bingley, Royal Bank of Scotland, Lloyds TSB and HBOS there are hopes of a significant shift in interest rates and mortgage liquidity in the short term. Whether this actually happens remains to be seen but the sector and the UK economy in general is crying out for assistance.

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