The lender said it was exiting the market for its own balance sheet purposes, but would continue to originate and sell on commercial loans to Lehman Commercial Mortgage Conduit Limited.
Northern Rock completed the sale of commercial loans on 22 June, with a net value of £833 million and has agreed to sell up to a further £730 million of such loans in the second half of the year.
Commenting on its interim results for the first half of 2007, Adam J Applegarth, chief executive of Northern Rock, said: “Operationally Northern Rock had a good first half in 2007. Mortgage lending has been particularly strong with a gross market share of 9.7 per cent and a net market share of 18.9 per cent, helped by improvements in retention of moving customers.
“The outlook for the full year is being impacted by sharp increases in money market and swap rates seen in the first half. This has resulted in a negative impact on net interest income, as mortgage pricing in the market generally has lagged behind increases in funding costs in the year to date.”
Mike Staight, director of Mustard Commercial Finance, commented: “I’m quite surprised Northern Rock has pulled out of commercial lending, as it was only in a low risk niche area anyway. Obviously, it’s a competitive sector, so margins are very thin, but a lot of people are trying to enter the market. Basel II can actually enable certain lenders to lend at finer margins. I don’t think its exit will leave a hole, because there is plenty of competition in the sector.”
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