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Northern Rock denies aggressive stance on repossessions for mortgage customers

20 October 2008 / by Rachael Stiles
Northern Rock insists it is not acting more aggressively than other banks in light of accusations that the nationalised bank has a repossession average three and a half times higher than the industry average.

Channel 4 has reported that, according to figures it received from the housing charity Shelter, Northern Rock is repossessing the homes of three and a half times more of its mortgage customers than its competitors are – according to the charity's figures, Northern Rock's repossessions account for 0.56 per cent of its mortgage book, compared to the industry average of just 0.16 per cent.

However, the bank's chairman Ron Sandler refutes "any suggestion that our position has been anything other than commercial and consistent with the way this bank has operated in the past." He "strenuously" denies that Northern Rock has been "overly aggressive."

He added that repossession remains a last resort for the bank, and that it is "encouraging customers who are struggling to maintain their mortgage payments to seek independent financial advice".

The Council of Mortgage Lenders has released a statement in order to calm fears regarding repossession figures in the UK as depicted by the media, which, it says, may be having the effect of "creating a misleading impression".

The CML believes that the media has experienced some confusion concerning the difference between the flow of properties being taken into possession by the lender, and the stock of properties in possession, which it says could have skewed the figures unfavourably in the case of Northern Rock.

The CML expects about 45,000 properties to be repossessed this year, which, it says, out of 11.7 million mortgages, remains a very modest rate of around 0.38 per cent. Almost all mortgage holders – 98 per cent – continue to pay their mortgages on time and in full.

Because all lenders, of all types, must adhere to rules on arrears and management of repossessions as set out by the Financial Services Authority, the CML can see no reason why any one lender, such as Northern Rock, would differ from any other in its approach to making repossessions.

As required by the FSA, "all lenders should be making best efforts to avoid repossession except as a last resort" the CML said, although policy does vary when each borrower's circumstances are taken into account.

Mortgage lenders and the CML support the mortgage rescue scheme which local authorities and housing associations are implementing – such as shared equity or rental plans – to help those households which are struggling to keep up with mortgage payments and remain in their homes.

There are currently about 335,000 UK homeowners in negative equity, and more than 60,000 add to these numbers each month, according to analysis from credit ratings agency Standard & Poor's. Government ministers are under pressure to reduce the strain on households which face the risk of rising unemployment at a time when mortgage rates are rising and house prices are falling.

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