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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