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01 Feb, 2008

Natalie Martin
Date: 01-Feb-2008

A Liberal Democrat peer has called on the chancellor to ban Northern Rock from offering its 125% LTV Together mortgage.
In a debate in the House of Lords, Lord Newby the Liberal Democrat spokesperson for the Treasury called on Labour peer Bryan Davies, Baron Davies of Oldham to get the chancellor to abolish the product.

Newby says: "Does the minister agree that one category of loans doomed to fail from the start is that where the loan value, from the outset, is significantly greater than the value of the house?

"Will he therefore, through the chancellor, instruct the current management of Northern Rock, to stop offering its Together loan?"

Lord Davies replied saying that Northern Rock is a private company that takes private decisions.

He added: "Government anxieties about Northern Rock are acute, and it will be important to take action in the very near future."

In the same debate Labour peer Lord Borrie also called on Lord Davies to consider taking criminal prosecution against those that offer loans to people that are unable to pay them back.

Borrie says: "Loans are being given that are doomed form the start because the individuals to whom they are given have quite inadequate means to pay them back.

"In those most serious cases, would not the power of deterrence be of great value by the wider use of criminal prosecution, which could have a great meaning across the board if some well-publicised cases were brought?"

But Davies responded by saying that although it was aware of the dangers in this area, particularly on the sell-and-rent back arrangements, it was tightening up its regulatory regime of these types of products.

A spokeswoman for NR says that it has no plans to abolish its Together product.

She also disagrees with the comments made by Lord Newby, adding that the product offers 30% as an unsecured loan and it is only 95% that is secured against the property.

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