When Gordon Brown urges the bank to “pass on” the interest rate cut, why doesn’t he lead by example with his very own state-owned mortgage company, Northern Rock? Because NR is up to no good – and the Financial Services Authority has given us a rare glimpse into exactly what its game is. It released a banking report (here, note 9.47) which confirmed that NR’s loyalty is to the state: that is to say, it must “focus on repaying its government loan”. Deplorably, it is doing this by deliberately overcharging those too poor to get a better deal.
Here’s now it works. Many millions (including myself) took up NR’s low fixed-term rates. But when this ends, you’re whacked on to the NR Standard Variable Rate which is priced, again according to the FSA, “around 75-90bps higher than the average fixed rate deal”. Most (myself included) sought a better rate elsewhere. But a staggering 200,000 people have been unable to do so. And why? Are they stupid? Willing to be public spirited and do their bit to repay Brown’s debt? Of course not. These will be the people too poor to get another deal. Or, in the FSA’s language, “probably represent worse-than-average credit risks”. So they are trapped – and milked – so NR can service its government loan. As I say in my column in this week’s magazine, it’s a novel approach for Labour: squeezing the poor until the pips squeak.
CoffeeHousers may argue that NR has to be run as a commercial concern. Sure, so why not offer a commercial loan rate to those who come off its fixed rate? Why play the loan shark? It seems to me that its policy is to squeeze as much cash as it can from the poor souls trapped in its deliberately overpriced SVR. Such usurious behaviour is planned deliberately, so it can funnel more cash to the government.
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