Northern Rock mortgage arrears double

Northern Rock mortgage arrears double

Northern Rock, the nationalised mortgage lender, admitted today that the number of customers in arrears on their home loans almost doubled in the last three months.

Arrears, which the lender previously boasted were well below the industry average, climbed from 0.57% to 0.95%, as customers found it more difficult meeting their monthly payments.

The bank has also struggled to boost savings, which before its crash last year stood at around £25bn.

In a trading update, the bank said it had seen modest progress in boosting retail savings with balances ending the quarter at £12.8bn.

As part of its recovery plan the bank needs to cut its mortgage liabilities. It has encouraged customers to redeem their mortgages in an effort to halve the size of its mortgage lending from a peak of £100bn. Gross residential mortgage lending in the first quarter was £1.2bn.

It said it was making steady progress in this area. "The mortgage redemption programme is progressing well, with redemption levels in the first four months of 2008 in line with the plan."

Progress could be hampered while the UK market remains "highly uncertain".

"More difficult economic and market conditions, combined with a shrinking mortgage book, have contributed to increased arrears levels. However, the overall credit quality of the loan book remains at a level assumed in the plan."

guardian.co.uk © Guardian Newspapers Limited.....continued below

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2008