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Northern Rock customers queued for savings.
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Former Rock Boss Receives Payout as Mortgage Holders Become ‘Orphans’
Writes Dan Drage dan.drage@consumerchoices.co.uk
Ex-Northern Rock Chief Adam Applegarth received a £750,000 severance it was revealed yesterday, just as the beleaguered bank announced that 60% of all mortgage renewal borrowers would be encouraged to leave this year.
Mr. Applegarth, at the helm during the bank’s near crash, is additionally entitled to draw on a pension pot of £2.5 million at the age of 55, having joined the bank almost twenty years ago.
Northern Rock looked set to become the first major high street victim of the credit crunch, when details of an emergency loan from the Bank of England were made public. In the resulting furore, a considerable number of Northern Rock account holders queued daily to withdraw their savings and close accounts.
The bank was only saved by government intervention, with the Prime Minister, Gordon Brown, installing Ron Sandler to head operations following the dismissal of Adam Applegarth.
In direct contrast to Mr Applegarth’s financial windfall, Ron Sandler announced this morning of Northern Rock’s intention to encourage around 60% of all borrowers re-mortgaging to move elsewhere. Mr. Sandler hopes to halve the bank’s loan book from £107 billion to £50 billion by withdrawing competitive offers. He hopes to have this phase completed by 2011.
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"These customers will become Northern Rock orphans because they won't have a realistic deal to switch to"
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Ray Boulger, of mortgage brokers John Charcol, believes this action has grave consequences for those affected:
‘For a market already struggling to meet demand, the fact that Northern Rock's customers are coming up for renewal will only make the situation worse’
He continues:
‘These customers will become Northern Rock orphans because they won't have a realistic deal to switch to, and they face far higher rates than they would have expected six months ago.’
Chris Eagle, Commercial Manager at Credit Choices, can see the mortgage market shrinking:
‘Nationwide (www.nationwide.co.uk) has followed the lead of the smaller building societies and withdrawn their competitive mortgage deals, and now it’s Northern Rock’s turn to back out. I suspect we will see a continuation of this activity among other high street mortgage lenders as the year unfurls.’
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