Northern Rock posts £724m loss

Author: By Kelly Macnamara, Press Association

The Newcastle-based company also said the share of its mortgages in arrears
had risen to 3.92 per cent by 30 June, from 3.67 per cent three months
before.

Northern Rock – which was taken into public ownership in February 2008 – said
it incurred an impairment charge on its loans of £602.2 million and expected
that figure to be similar in the second half.

Northern Rock was notorious for its Together loans which lent up to 125 per
cent of home values.

As the recession bites and house prices fall, it is these loans that are
responsible for its soaring rates of mortgages more than three months in
arrears. When these loans are stripped out the share falls to 2.85 per cent.

The lender said the number of properties repossessed as of June 30 were 2,522,
compared with 3,620 at the end of 2008.

Chief executive Gary Hoffman said the lender might continue to see a small
increase in the three-month arrears rate, but added that the share increases
were slowing.

The Rock was at the centre of the first bank run in 140 years in September
2007 as the credit crunch exposed its over-reliance on money markets.

The crisis forced it to turn to the Bank of England for £26.9 billion in
emergency funding before being nationalised when sale attempts fell through.

Northern Rock now owes the Government £10.9 billion after paying back the loan
with mortgage redemptions as it encouraged borrowers to seek deals elsewhere.

But this has drained money from the mortgage market and in a change of plan
earlier this year the bank is now increasing lending and delaying the
repayment of the loan.

Today it said the Government loan would increase after its planned
restructuring.

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