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'Take cash and leave' says lender
Some lenders are being forced into tough decision to clear their decks
A former sub-prime mortgage lender is offering an 8% discount to its borrowers if they redeem their loans.
Edeus, which started up in 2006, is making the cash-back offer to 400 customers and may extend it to thousands more if it proves popular.
The lender wants to get the loans off its books but can no longer find professional investors willing to buy.
A spokesman admitted the idea sounded "bizarre" but it was cheaper than selling the loans in any other fashion.
'Lesser evil'
Alan Clearly, the managing director of Edeus, admitted this would mean making a loss on each mortgage.
"It's the lesser of two evils," he said.
"Over the last 10 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," he added.
Mr Clearly said the response from his customers had been very good so far, with 20% already expressing a firm interest in paying off their loans early.
The market for selling on the mortgages is almost dead, and they can be sold only at a very distressed price 
Ray Boulger, John Charcol
Edeus is also willing to waive its early redemption and exit fees, but people will have to pay any set-up fees that might be demanded by a new mortgage lender.
The company is no longer offering mortgages to new customers.
Along with other sub-prime and specialist lenders it has been hit hard by the credit crunch.
As a result it has not been able to package up its mortgages and sell them off wholesale to professional investors in order to raise fresh funds.
"The market for selling on the mortgages is almost dead, and they can be sold only at a very distressed price," said Ray Boulger, from mortgage brokers John Charcol.
Earlier this year several other lenders which had relied on this business model withdrew from the market and closed down.
Edeus says it is staying in business until the market revives by offering mortgage advisory services to other firms in the industry.
Lower rates
Meanwhile the average cost of new, two-year, fixed rate mortgages has dropped back below 7%.
"In the last week a number of lenders including Halifax, Abbey, Cheltenham & Gloucester, Nationwide BS and Woolwich have all started to reduce their rates," said Michelle Slade, from Moneyfacts.
"[This] has resulted in the average two-year fixed falling back below 7%, today standing at 6.96%," she added.
The Woolwich, part of Barclays bank, has become the latest to join in by cutting its fixed-rate mortgage deals for the second time in two weeks, by up to 0.32%.
The latest cuts affect its 10, five and three-year deals.
But experts said it was too early to say the mortgage market had "turned the corner".
"We need to see a more prolonged period of rate reduction, something which is starting to look unlikely," Ms Slade said.
Some lenders are being forced into tough decision to clear their decksA former sub-prime mortgage lender is offering an 8% discount to its borrowers if they redeem their loans.
Edeus, which started up in 2006, is making the cash-back offer to 400 customers and may extend it to thousands more if it proves popular.
The lender wants to get the loans off its books but can no longer find professional investors willing to buy.
A spokesman admitted the idea sounded "bizarre" but it was cheaper than selling the loans in any other fashion.
'Lesser evil'
Alan Clearly, the managing director of Edeus, admitted this would mean making a loss on each mortgage.
"It's the lesser of two evils," he said.
"Over the last 10 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," he added.
Mr Clearly said the response from his customers had been very good so far, with 20% already expressing a firm interest in paying off their loans early.
The market for selling on the mortgages is almost dead, and they can be sold only at a very distressed price Ray Boulger, John Charcol
Edeus is also willing to waive its early redemption and exit fees, but people will have to pay any set-up fees that might be demanded by a new mortgage lender.
The company is no longer offering mortgages to new customers.
Along with other sub-prime and specialist lenders it has been hit hard by the credit crunch.
As a result it has not been able to package up its mortgages and sell them off wholesale to professional investors in order to raise fresh funds.
"The market for selling on the mortgages is almost dead, and they can be sold only at a very distressed price," said Ray Boulger, from mortgage brokers John Charcol.
Earlier this year several other lenders which had relied on this business model withdrew from the market and closed down.
Edeus says it is staying in business until the market revives by offering mortgage advisory services to other firms in the industry.
Lower rates
Meanwhile the average cost of new, two-year, fixed rate mortgages has dropped back below 7%.
"In the last week a number of lenders including Halifax, Abbey, Cheltenham & Gloucester, Nationwide BS and Woolwich have all started to reduce their rates," said Michelle Slade, from Moneyfacts.
"[This] has resulted in the average two-year fixed falling back below 7%, today standing at 6.96%," she added.
The Woolwich, part of Barclays bank, has become the latest to join in by cutting its fixed-rate mortgage deals for the second time in two weeks, by up to 0.32%.
The latest cuts affect its 10, five and three-year deals.
But experts said it was too early to say the mortgage market had "turned the corner".
"We need to see a more prolonged period of rate reduction, something which is starting to look unlikely," Ms Slade said.
