The decision has come about as a result of Northern Rock selling the book of mortgages and has nothing to do with the credit status of the individuals concerned.
Under the terms of their loan with Northern Rock, retired home-owners had the option to borrow further sums of money at low rates, to capitalise on equity tied up in their property. However, this has now been ruled out, as the loans have been transferred to new owner, Papilio UK Equity Release Mortgages, a subsidiary of JP Morgan.
The book of mortgages was sold to JP Morgan four years ago but, until last month, the loans were still being managed by Northern Rock. But the transfer of the deeds last month signalled the end of that arrangement and all loans are now being administered by Papilio.
Customers had been led to believe that the transfer of ownership would have no effect on their loan and Northern Rock issued letters as recently as 2010 – after the completion of the JP Morgan sale – confirming that borrowing was still permitted.
However, everything has now changed as Papilio has told customers that it ‘does not offer lending facilities,’ effectively blocking them from accessing the equity in their homes.
JP Morgan has denied customers have been mistreated or led astray in any way, insisting that any additional borrowing has only ever been agreed at the discretion of Northern Rock and was not a core entitlement. But as a gesture of good will, JP Morgan has said it will waive any fees for early redemption, if customers opt to remortgage elsewhere.
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