Northern Rock progresses but mortgage arrears rise

by Gill Montia

Story link: Northern Rock progresses but mortgage arrears rise

Northern Rock has reported a rise in the number of its mortgage customers falling into arrears.

The bank was nationalised in February of this year and its chairman, Ron Sandler, has admitted that its customer base is changing as, over time, borrowers with good credit histories remortgage with other lenders.

The bank has been actively encouraging customers to move elsewhere, so that it can repay its loan to the Bank of England as speedily as possible.

However, less creditworthy customers will find it difficult to switch lenders, as will customers with less than 10% of equity in their homes.

In the four months to the end of April, arrears of three months of more rose from 0.57%, to 0.95% but remained below the Council of Mortgage Lenders’ average of 1.1%.

Northern Rock has around 700,000 mortgage borrowers and 0.95% represents 6,650 households more than three months behind in repayments.

Mr Sandler says he has confidence in the credit quality of the bank’s loan book and also reported that depositors are returning to the bank; balances stood at £12.8 billion at the end of the March, compared with £10.5 billion at the end of December.

So far, Northern Rock’s repayment obligations to the Bank of England have been honoured.