Northern Rock has been highly effective in repaying its government loan – some 18bn of the 27bn has already been repaid and the government has recognised that every pound to be repaid was effectively money taken out of the lending arena, thereby reducing liquidity.
Northern Rock is expected to lend some 14bn over the next two years – 5bn in 2009 and 9bn in 2010.
And more positive news emerged with the announcement by the Royal Bank of Scotland that it will commit to lending a further 25bn in 2009, with up to 9bn of this being for mortgages.
This is in addition to its original 2009 plans and is a requirement of RBS being able to insure in excess of 300bn of loans and investments against future losses.
Both initiatives seem to augur well for the mortgage market although it remains to be seen what proportion of funds will be distributed via brokers and what will be channelled via lenders’ retail branches.
Nevertheless, an increase of some 14bn in funds from the two organisations represents a near-10% boost to the expected gross mortgage market level of 145bn in 2009.