Lloyds TSB in mortgage deal with Northern Rock

By Steve Slater

LONDON (Reuters) - Lloyds TSB has struck a three-year deal to take on customers of Northern Rock who are coming to the end of fixed rate mortgage deals.

Certain Northern Rock mortgage customers will be offered the opportunity to switch to a Lloyds mortgage from July.

The banks said the deal will help Lloyds accelerate its new business growth in a low-risk manner and assist Northern Rock reduce the size of its balance sheet.

Northern Rock said the deal should save jobs for 100 of its staff.

The banks did not estimate how many mortgages will switch under the deal, but Lloyds said it expects about 180,000 Northern Rock mortgage customers to come to the end of fixed rate deals in the next three years.

Lloyds has set a maximum loan to value ratio of about 80 percent for the mortgages it will take on, but it said this will be flexible. It has some of the tightest lending criteria with an average loan-to-value ratio of 44 percent on its mortgage book and 63 percent on new loans.

Lloyds, owner of Cheltenham & Gloucester, has about a 9 percent share of the UK mortgage market, but has lost share in recent years.

Northern Rock plans to halve its mortgage book by 2011 as part of its turnaround efforts.