Northern Rock profits scrutinised
Northern Rock revealed an 8.1 per cent share of UK gross mortgage lending with 0.39 per cent of mort-gage accounts three months or more in arrears in its preliminary annual reports. It also increased its total underlying profit by almost a quarter (24.9 per cent) from December 2004’s total of £64.9 billion.
Following the lenders’ announcement that it had made pre-tax profits of £504.6 million, up by 14.3 per cent from 2004, Alan Lakey, senior partner at Highclere Financial Services, suggested these profits were largely as a result of the high fees charged by the lender.
He said: “Northern Rock charges some of the highest rates and fees for its products and although it can argue that its rates have gone down, admin fees have increased 100 to 200 per cent over the last few years. Lenders are realising that upfront fees are more profitable as clients are not staying after the initial deal runs out.” Lakey drew particular attention to the valuation fee with Northern Rock charging £505 for a £250,000 property. He added that a 1.5 per cent arrangement fee would price a number of buyers out but admitted that Northern Rock is not the only lender to charge a fee such as this.
He added: “I guess this is just part of the entrance and exit fees argument that has been going on for some time now.”
Ron Stout, public relations manager at Northern Rock, said: “It’s simply not the case that our record profits are down to large admin fees and our relationship with the mortgage intermediary network continues to be strong. The fact that we continue to attract significant levels of new business and have an excellent record at retaining our existing customers shows the vast majority of our customers are happy with our mortgage products.”
“Mortgage intermediaries are under an obligation to offer best advice to customers. This will include consideration of the overall price of the product and the products’ suitability for the customer,” he added.