The state controlled lender, which suffered pre- tax losses of £724.2m in its half-yearly results, revealed borrowers on the Together range in at least three months of arrears reached 12,100. Together mortgages accounted for half of the arrears and two thirds of the lender’s repossessions.
Although the number of repossessions dropped to 2,500 from 3,600 at the end of 2008, arrears of over three months have now steadily risen to 3.92% by the end of June, compared to 3.67% at the end of March and 2.92% at the end of 2008.
A spokesman for Northern Rock commented: “We acknowledge that our historical Together mortgage book is not performing well in the current economic environment.”
The bank continued to issue the range for several months after it fell into financial problems in September 2007 and it has faced criticism in the past year for the range accounting for a high number of arrears and repossessions. (Northern Rock gets hit for Together”, mortgagesolutions-online.com, 24/11/08)
Katie Tucker, technical manager at Mortgageforce, said it was a short-sighted decision in hindsight not to pull these deals immediately as soon as Northern Rock got into trouble.
She said: “At the time the bank started issuing these loans, properties were not losing value so it did not seem like a high risk move. However, it now means that thousands of people are in trouble and unlikely to rebuild their futures quickly.”
Andy Pratt, chief operating officer at Alexander Hall, said it was no surprise that customers on the Together range had fallen into arrears because the bank stretched itself too far.
He added: “It was a risky product and the arrears show this. Unemployment will be a key barometer of the arrears and if unemployment continues to rise, arrears will too.”
