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Rock borrowers trapped by fees

by: Mortgage Solutions
  • 26/07/2010
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Northern Rock Asset Management (NRAM) - the so-called "bad bank" - is hitting its mortgage borrowers with early redemption charges (ERCs) if they attempt to port their mortgages when they move house.

Despite a portability clause in all Northern Rock mortgage contracts, roughly 400,000 customers of NRAM face ERCs of 3% because the majority state-owned bank stopped lending at the start of the year.

The European Union approved the break-up of the bank into a mortgage lender and savings bank, Northern Rock Plc, and a mortgage and loan servicer, NRAM, in October last year.

NRAM is unable to lend new mortgages and has been tasked instead with the repayment of government bailout funds. The bank wrote to all mortgage customers after its FSA authorisation on 4 January this year to offer an ERC fee waiver period between January and June 30, when the amnesty ended.

A spokesman said: “The six month waiver was instigated so that people planning to move house would not be disadvantaged, but obviously this was a temporary measure. We may have captured a few who moved at the beginning to avoid the fee and so far very few customers have complained, but that may reflect the lack of activity in the market.”

“This is an exceptional situation we find ourselves in,” he added.

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