Northern Rock faces losses but still plans £14 billion mortgage loans

Northern Rock, the UK nationalised bank, has reported it faces losses but as agreed with the Government in February it will lend a further £14 billion in mortgage loans.

The number of Northern Rock mortgage accounts more than 3 months in arrears has risen sharply from 2.92% at the end of 2008 to 3.67% at the end of March.

This level of arrears compares to only 1.18% at the end of June 08.

Recognising the difficulty that many homeowners are facing with their mortgage payments, Northern Rock has signed up to the Government’s Homeowners Mortgage Support Scheme (HMS).

On a slightly more positive note, the bank has seen some ‘tentative signs of improvement in early arreas trends’, those of less than 3 months.

It puts this down to its investment in its debt management capability but also to the generally improved affordability levels of mortgages as a result of the reduction in interest rates.

The £14 billion of new mortgage loans will happen over the next 2 years, with up to £5 billion being available this year.

In March, Northern Rock improved the competitiveness of its mortgage products and as a result saw the number of mortgage applications rise significantly compared with February, up 70%.

The average LTV of new lending in the first quarter was 48%.

It will be interesting to see what happens to this LTV average as their new mortgage products get taken up and Northern Rocks seeks to achieve the level of mortgage loans that it has committed to.