Rock's 'bad bank' mortgage borrowers caught in fee trap

Northern Rock mortgage borrowers on the toxic loan side of the bank will be slammed with early redemption charges if they attempt to remortgage before their deal ends.

The fees will hit roughly 400,000 borrowers who took out five-year mortgages, the Daily Mail reports. 

Borrowers face fees of 3% of their home loan - despite contracts saying the mortgage would be portable to a new property.

Normally, when a borrower moves home, they stay on their existing mortgage deal and borrow some extra money from their lender if the new property is more expensive.

But Northern Rock Asset Management - the ‘bad' part of the bank - is unable to lend any money. This forces most homeowners looking to buy a more expensive property to redeem their mortgage early.

Experts have slammed the charges as unfair and urged the Government to step in.

The Mail quotes Ray Boulger as saying that as the Government effectively owns Northern Rock, it is responsible for making sure its customers are treated fairly.

The banks did waive charges between January and June 30, but has ended the amnesty.

A spokesperson for Northern Rock said: "The early redemption charge waiver was a temporary measure, implemented in order to ensure that customers were not disadvantaged over the period of the legal and capital restructure.

"Early redemption of a mortgage is now liable for a charge as per the terms and conditions of the product."

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