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Rock’s “bad bank” mortgage borrowers caught in fee trap

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  • 21/07/2010
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Northern Rock mortgage borrowers on the toxic loan side of the bank will be slammed with early redemption charges if they attempt to remortgage before their deal ends.

The fees will hit roughly 400,000 borrowers, according to a story in The Daily Mail, who took out five-year mortgages. Borrowers face fees of 3% of their home loan – despite contracts saying the mortgage would be portable to a new property.

Northern Rock Asset Management – the ‘bad’ part of the bank – has no funding to lend any further cash, which means homeowners looking to port their mortgage to another lender have been caught out in the funding drought. This is why most homeowners are being forced to redeem their mortgage early.

Experts have slammed the charges as unfair and urged the Government to step in.

The Mail quotes Ray Boulger as saying that as the government effectively owns Northern Rock, it is responsible for making sure its customers are treated fairly.

The bank did waive charges between January and June 30, but has ended the amnesty.

A spokesperson for Northern Rock said: “The early redemption charge waiver was a temporary measure, implemented in order to ensure that customers were not disadvantaged over the period of the legal and capital restructure.

“Early redemption of a mortgage is now liable for a charge as per the terms and conditions of the product.”

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