Northern Rock

(asked on 10th November 2020) - View Source

Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment he has made of the effectiveness of permitting a standard variable rate of over 4 per cent on former Northern Rock mortgages now managed by unregulated lenders, following confirmation by the Bank of England that interest rates will remain at 0.1 per cent; and what recent discussions he has had with the Financial Conduct Authority in relation to their oversight of unregulated lenders.


Answered by
John Glen Portrait
John Glen
Paymaster General and Minister for the Cabinet Office
This question was answered on 16th November 2020

The setting of SVRs is a generally a matter for lenders, in which the government plays no role. In government sales of NRAM mortgages, however, purchasers have been restricted in the changes they can make to the SVR for at least 12 months after the transfer of ownership. The purchasers in most recent UKAR asset sales have been required to set the SVR by reference to the SVRs charged by a basket of 15 active lenders, for the lifetime of customers’ loans.

Recent data from Moneyfacts found the average standard variable rate (SVR) across the entire mortgage market to be 4.44%. The rates former NRAM customers pay are therefore consistent with market standard rates.

In all sales of UKAR assets, the servicer of customers’ loans has remained FCA-regulated. In all but the first sale, the legal title holder of customers’ loans has also remained FCA-regulated.

The Government is open to considering an extension to the regulatory perimeter where the benefits to consumers and markets can be demonstrated. It is important to note, though, that a change in perimeter will not help customers to switch to a cheaper deal, or materially lower the rates of their mortgage.

Thousands of borrowers will now find it easier to switch to an active lender or continue interest only payments thanks to recent rule changes by the FCA, and we continue to work with the FCA to look for practical new solutions to help borrowers.

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