Northern Rock to offer 90% mortgages

Northern Rock to offer 90% mortgagesNorthern Rock, the bank nationalised during the credit crisis, is preparing to launch a series of mortgages that offer up to 90 percent of a property's value.

Nationalised lender Northern Rock is poised to launch mortgages that require just a 10% deposit or 90% loan to value as lenders become more willing to take on extra risk.

Higher loan to value mortgages are riskier because they rely on a buoyant housing market because there is less equity there is less cash to defend from a fall in house prices. This is particularly relevant today as property prices are facing downard pressure. However, such mortgages are also more profitable.

Northern Rock has been considering the move since 2009, when it was allowed to resume lending following its nationalisation in February 2008, and will make limited funds available for such deals. Even with lenders resuming these types of loans, the number of products is down 75% from precrisis levels.

Options for Northern Rock include a sale, stock market flotation or "remutualisation" turning Northern Rock into a company owned by its customers, such as UK loans and savings group Nationwide.

Analysts consider that an eventual sale of Northern Rock is the most likely outcome for the business. Virgin Money, supermarket retailer Tesco's (TSCO.L) banking arm and private equity firm JC Flowers have been cited as possible acquirers.