Mortgage News Northern Rock Mortgage Arrears Rise

24 April 2009 / by Rachael Stiles

The proportion of Northern Rock mortgage customers in arrears or three months or more increased to 3.67 per cent in the first quarter of 2009, up from 2.92 per cent at the end of last year.

In a trading statement released this week, Northern Rock admitted that its mortgage arrears had increased, but said that there are “signs of improvement” in early arrears (fewer than three months), which it says reflects its investment in debt management and improved levels of affordability as interest rates have fallen.

Northern Rock has also become one of the first mortgage lenders to participate in the Government’s Homeowner Mortgage Support Scheme, which is designed to help borrowers suffering from a temporary loss of income.

“The Company remains committed to helping customers in difficulty wherever possible – repossession is a last resort,” the bank said.

As announced recently as part of its revised agreement with the Government, the nationalised bank is now increasing the amount it lends to homeowners.

This marks an about-turn in Northern Rock’s previous agreement with the Government, which was to significantly reduce its mortgage lending in order to shrink the business and focus on repaying its debt to the taxpayer.

It is increasing lending largely by reducing the rate of its mortgage redemption scheme by about half, which saw it turning away existing customers looking to remortgage, as well as increasing lending to new customers.

Previously criticised for writing mortgages for up to 125 per cent LTV (loan to value), pushing customers into negative equity when the property market began to slide, Northern Rock has improved the quality of its new lending, with an average LTV of 48 per cent for first quarter lending.

March saw Northern Rock mortgage applications rise 70 per cent compared to the previous month, after it introduced a more competitive mortgage range in line with its pledge to increase mortgage lending by £5 billion this year, as part of its plans to lend £14billion over the next two years.

Commenting on Northern Rock’s first quarter results, chief executive Gary Hoffman said: “The economic environment remains difficult but our trading performance in the quarter was in line with our expectations.”

“We have invested heavily in our debt management activities and are beginning to see some signs of improvement in early arrears. We have also announced

this week that we are one of the first lenders to join the Homeowner Mortgage Support Scheme, which will serve as an additional tool to help customers facing financial difficulty to remain in their home.”

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Written by Editorial Team