Compensation for Northern Rock borrowers with 125% mortgages
Borrowers who took out controversial 125% LTV mortgages in line for bumper payout.
Thousands of borrowers who took advantage of Northern Rock’s 125% loan-to-value (LTV) mortgage deals are to be paid compensation.
The controversial ‘Together’ mortgages consisted of a 95% mortgage and an unsecured loan of up to 30% of the property’s value, meaning that altogether a borrower could get a loan worth 125% of the property they were buying. They have long been cited as an example of the irresponsible borrowing that took place before the credit crunch in 2007.
However, more than 40,000 borrowers who took out personal loans of between £25,000 and £30,000 with Northern Rock – almost entirely those who took out the loan as part of the Together deal – are now in line for compensation of an average of more than £6,000 each.
That’s because the High Court has ruled that the paperwork they were sent included incorrect wording, meaning that the loans are not legally enforceable.
A total of £261 million in interest payments will now be refunded by Northern Rock Asset Management, the ‘bad bank’ which holds all of the worst loans and mortgages and is still owned by the Government. The better parts of Northern Rock were sold to Virgin Money back in 2011.
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What happens next?
Northern Rock Asset Management has said that is considering whether to appeal, so borrowers cannot celebrate a windfall just yet. Should it decide against that action, it will contact the borrowers directly, so they won’t have to do anything to receive their compensation.
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Comments
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I think naïve is a better choice of word than "idiots" - I am one of those idiots you speak of Nick Pike. Had Northern Rock been more clear with the information they gave then I wouldn't have used them in the first place. The service has always been awful and they really have been the worst managed company I have ever had dealings with. We haven't ever had any problems making the repayments.... although have paid a very high price for very bad service.
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I'm fairly certain this already happened about 2 years ago. The payouts were because Northern Rock omitted figures from their statements which were legally required, nothing to do with irresponsible lending/borrowing.
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So we the tax payer have to pay off these idiots. The problem has been over recent times that the wrong people have been spoon fed too much debt debt. The gamble did not pay off. House prices have collapsed back from the peak. If I bet on a horse tomorrow, can I get 'compensation' if the nag loses?
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27 December 2014