CMC to axe two-tier borrowing rates

City Mortgage Corporation, the largest provider of mortgages to "non- status" borrowers, is withdrawing its controversial two-tier interest rate plans with effect from Friday. They will be replaced by a single rate plan, David Steene, managing director, said. Non-status lenders have been blamed for sharply increasing interest rates as soon as borrowers miss a payment and forcing them to lose their homes.

The Office of Fair Trading announced new guidelines for non-status loans on 18 July. CMC has 33,000 customers, of whom 27,000 already have single- rate plans. It will continue to consider loan applications if interest payments are less than 40 per cent of borrowers' gross income.