Lloyds TSB in 3-year deal to offer mortgages to Northern Rock customers UPDATE
06.05.08, 6:20 AM ET
(Adds detail, Northern Rock comment)
LONDON (Thomson Financial) - UK bank Lloyds TSB Group Plc. (nyse: LYG - news - people ) said it has signed up to a three-year agreement under which it will offer new mortgages to selected Northern Rock (other-otc: NHRKF.PK - news - people ) customers nearing the end of their fixed-rate deals.
Under the agreement, eligible Northern Rock customers will be offered a Lloyds loan and those who accept will be exempt from the lender's standard application fee.
Lloyds will apply its usual lending criteria, which include a maximum loan-to-value ratio of 80 percent, a spokesman for the bank said. Lloyds will also pay a commission fee to Northern Rock for each successful mortgage application.
Northern Rock, which has announced plans to shed one-third of its 6,000-strong workforce under a government-sponsored turnaround plan, said the agreement would safeguard about 100 jobs.
'We expect the new service to require around 100 existing staff who may otherwise have been at risk of redundancy,' the bank said.
Lloyds, the United Kingdom's fourth-biggest bank by market value, said the agreement would 'accelerate new business growth in a low risk manner while assisting Northern Rock towards its goal of reducing the size of its balance sheet'.
Northern Rock, once the UK's eighth-biggest bank, was nationalised earlier this year after the global credit crunch forced it to seek emergency funding from the Bank of England.
Northern Rock aims to repay a 25 billion pound Bank of England loan and reduce its portfolio of mortgage loans by half by 2011.
Lloyds shares were down 0.3 percent at 389-1/4 pence by 9:55 a.m., while the FTSE 100 share index was up 0.3 percent at 5989.2 points.
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