Northern Rock has had £3billion of its debt to the taxpayer wiped off by the Government, in return for shares in the nationalised bank, increasing the taxpayer's exposure to its problems.
As Northern Rock continues its struggle to survive amid the chaos in the housing and mortgage market, the Government has thrown it another lifeline, despite promising the taxpayer that the bank's £30billion debt would be repaid in full.
Northern Rock has been repaying the emergency loan, but still owes £17.5billion – which has now been reduced by £3.4billion, making the chances of taxpayers recouping their money even less likely as it depends on the survival of the bank.
Meanwhile, Northern Rock's customers have no such lifeline as they battle to keep up with higher mortgage
rates; the number of Northern Rock mortgage customers having their homes repossessed shot up 180 per cent in the first six months of 2008 compared to the same time last year.
According to the bank, this is largely as a result of people borrowing more than the value of their homes, with as many as 70 per cent of those who have lost their homes having taken out Northern Rock's Together mortgage which allowed them to borrow 125 per cent LTV.
Those who have been in arrears for at least three months now account for 1.18 per cent of Northern Rock's mortgage customers, up from just 0.83 per cent in the same period in 2007.
On the anniversary of the dawning of the credit crisis, Northern Rock – the run on which last summer for many symbolises the beginning of the end – announced losses of £600million so far this year. Opposition parties blame the government for propping up the failing bank and putting taxpayers' money at risk.
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