Are all the best Northern Rock mortgages in Granite?
The opposition has alleged that the best mortgages were put into Granite, in order to make it easier to sell their bonds on the open market. But this may not be true. Granite has been used to finance the recent rapid expansion of Northern Rock’s activities, and its loans tended to be bigger than those advanced to the average Northern Rock customer, with a higher risk in terms of loan-to-value. The average mortgage in Granite’s book was valued at 117,000 and the average size of the loan was 77% of the value of the property, compared with 60% for Northern Rock loans overall. What will happen to Granite now? The new boss of Northern Rock, Ron Sandler, has made it clear that he wants to run down the size of the Northern Rock mortgage book. As a result, Northern Rock is not offering attractive rates on new mortgages, or to those customers who are coming off its fixed-rate deals. Therefore, its use of Granite as a financing vehicle is likely to shrink and perhaps disappear. If credit markets
