'Cash to leave' offer from lender

The firm is the latest mortgage business to offload its customers

A company that specialises in buying home loans from mortgage lenders is offering some customers a 15% discount if they redeem their mortgages early.

Oakwood, majority owned by the investment bank Credit Suisse, is copying the recent example of the sub-prime lender Edeus.

Last month Edeus offered 8% discounts to some of its customers if they took their mortgages elsewhere.

The Oakwood offer applies to 250 of its current borrowers.

Letters to the borrowers are coming from Engage Credit, whose chief executive Jason Miller said he had been asked to encourage borrowers to leave.

"At the direction of Oakwood Homeloans, Engage Credit has deployed a strategy to target selected borrowers which will allow them to redeem their outstanding mortgage balances at a discount," he told the website Mortgage Strategy.

"This strategy will allow Oakwood to deleverage its exposure to the housing market while giving selected borrowers incentives to refinance," he explained.

Oakwood wants to reduce the risk of holding onto the mortgages in the depths of the credit crunch and the slump in the property market.

If it simply sold them to another buyer, it would almost certainly incur a large loss.

So the company is trying to get the mortgages off its books by encouraging the customers to move their loans elsewhere.

They can do this by remortgaging with other lenders, if possible, or by paying off the loan in one go with their own funds.

Oakwood will waive its usual early repayment charge and £120 exit fee.

"This shows it is still impossible for lenders to refinance the mortgages they have in the normal way - by securitisation or sale," said Ray Boulger of mortgage brokers John Charcol.