Northern Rock posts £1.3bn loss as repossessions soar
by Gill Montia
Northern Rock has posted a loss of £1.36 billion for 2008, the deficit increasing from a loss of £585 million in 2007.
The bank remained ahead on its repayment of the £26.9 billion of taxpayers’ money used to bail out the business and has around £8.9 billion of the loan outstanding.
Chief executive Gary Hoffman says the lender has also made good progress against the business plan objectives drawn up at the time of its nationalisation, in February 2008.
In its heyday, Northern Rock offered high loan-to-value mortgages (LTV) which have left it particularly exposed in the recession and property market downturn.
As a result, home repossessions rose by 63% last year to 3,620 and Mr Hoffman comments “given the external economic backdrop it is likely that repossessions will continue to be a feature of the market over the coming year”.
The number of its mortgage accounts in arrears of three months or more has risen to 17,264, up from 3,492 at the end of 2007.
The increase takes the percentage of its total mortgage book in arrears to 2.92%, compared with an industry average of 1.88%.
Meanwhile, the number of borrowers in arrears of more than three months on its notorious 125% LTV “Together” loans increased to 4.5%.
New mortgage lending shrank to around £2.9 billion last year, compared with £29.5 billion in 2007, as the bank actively discouraged new borrowers and ran down its mortgage book.
However, last week, Northern Rock announced its return to new lending and says it will be offering £14 billion in mortgages on responsible terms over the next two years.
Around £5 billion will be made available this year and a further £9 billion in 2010.