In praise of Northern Rock
I'm getting heartily fed up with all the sanctimonious commentary about Northern Rock deserving the current crisis on the grounds they lent to people who were high risk.
I've got a Northern Rock mortgage.
I've got it because they were the lender that was prepared to give me a 100% plus deal. I.e. I didn't need a deposit and I was able to borrow a bit more to buy some furniture.
I don't think it's unreasonable that people who don't have a family trust fund to put up a deposit, or who have to buy their own furniture rather than inherit it, should be able to be home-buyers.
There was nothing irresponsible about me taking out that size of loan or about them lending it to me.
They have also been criticised for lending multiples of 5 or more times salary to people. In Hackney a one bedroom flat sells at about £180,000 so unless lenders are prepared to lend at 5x salary then no one with an income under £36k would ever be able to buy.
What is happening to Northern Rock is an outbreak of mass hysteria amongst savers that has nothing to do with the company's business model, which was actually pretty sensible - spotting there were a bunch of people (20% of the market!) who wanted to buy but didn't have a deposit, and helping them get on the housing ladder.
My hunch is that most of the people retrospectively attacking them already own their homes and can deliver pious lectures about "risky lending" without remembering what it's like to be, or to want to be, a first-time buyer.