Potential Northern Rock takeover on the cards

03 October 2007
New-York based private equity company firm JC Flowers & Co., LLC has reportedly set aside £15 billion for a possible takeover of recently troubled bank Northern Rock. Following share price declines at Northern Rock earlier this week, prices have now picked up by approximately 10 per cent as a result of this prospective development.

The Treasury has reportedly given JC Flowers & Co., LLC and Cerberus Capital Management, L.P. permission to engage in acquisition discussions with the group, and Lloyds TSB is also said to be considering another bid.

Despite this, Northern Rock has reportedly withdrawn a number of incentives for its online Together mortgage applications, effective October 4.

Together mortgages are flexible mortgages which combine the buyer’s secured mortgage with an unsecured loan at a single interest rate with one combined monthly payment.

According to mortgagestrategy.co.uk, the 105 per cent LTV (loan-to-value) tier has now been removed from the range. The maximum LTV on the secured part of the loan has now been reduced to 95 per cent LTV and rates start from 7.2 per cent.

The maximum on buy-to-let products is now 85 per cent LTV and rates start from 6.3 per cent. Its flexible fixed-rate mortgages are now available at 90 per cent to 95 per cent LTV, with rates from 6.6 per cent.

Other changes include the withdrawal of its remortgage valuation incentive, and the option of adding valuation costs to the loan for buy-to-let borrowers has also been removed.

However, the company is reassuring customers that despite its recent struggles, it continues to be “open for business as usual”.

“The Chancellor has made it very clear that all existing savings accounts with Northern Rock are safe and secure during the current instability in the financial markets”, the group adds.

Find out more about Northern Rock mortgages and Northern Rock internet banking