A mortgage firm has decided to reduce loans for some customers by eight per cent - in order to encourage redemptions.
A UK mortgage lender has decided to offer a hefty discount to borrowers who manage to redeem their loans, a money-losing approach that it considers "the lesser of two evils".
Edeus, which was set up two years ago and specialises in sub-prime customers, has told 400 of its borrowers that they can have eight percent off the total value of their loan - if they pay in full. This offer has come about due to the significant credit crunch-induced market squeeze, which has made it much more difficult for firms to sell on debt.
Therefore, Edeus has struggled to sell on its sub-prime mortgages to professional investors - and has decided that encouraging customers to pay up through financial inducement will prove cheaper. The firm also plans to extend the discount offer to more of its customers if the initial trial proves a success.
Alan Clearly, the managing director of Edeus, commented: "It's the lesser of two evils…Over the last ten months the only way we have been able to raise fresh loans is by offering steep discounts to multi-national banks.
"So instead of offering that to the bank we are dealing with customers directly."
