How will Northern Rock mortgage holders fair after the split?
Labour MP Jim Cousins, a member of the Treasury select committee, has made some very interesting observations regarding Northern Rock and the future of those customers who would be left with the "bad bank" section of the company. As we covered earlier this week, Northern Rock is on the verge of being split up into a so-called "good bank" and a "bad bank" with the idea that the good bank would be sold off to an independent third party. So what about customers left with the bad bank?
The so-called bad bank will effectively contain the more risky loans and mortgages from the Northern Rock business leaving many mortgage holders effectively locked in to the bad bank for the foreseeable future. Unless there is a massive improvement in the UK property sector in the short to medium term it is highly unlikely that any other mortgage providers would actively look to attract any Northern Rock bad ban" customers, leaving them possibly on less competitive mortgage rates than the wider market.
While on the surface the idea of splitting Northern Rock and looking to sell on the more lucrative business makes perfect sense, it will be interesting to see the size of the loan book which the government will have to retain for the foreseeable future.
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