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Northern Rock: 20pc Of Its Customers Face Negative Equity

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http://www.telegraph.co.uk/money/main.jhtm...3/cnrock103.xml

Northern Rock: 20pc of its customers face negative equity

By Philip Aldrick

Last Updated: 9:36pm BST 02/08/2008

Northern Rock, the state-owned bank, will reveal this week that roughly one in five of its mortgage customers faces negative equity next year as it unveils a heavy loss for the six months to June.

About 5 per cent of the nationalised lender's mortgage book is already thought to be in negative equity, reflecting Northern Rock's aggressive tactics of lending up to 125 per cent of the value of a home in its last years as a private company. Another 15 per cent is expected to have been lent to households with less than 10 per cent equity. That equity will be rapidly whittled away next year as house prices tumble.

HBOS, the country's biggest mortgage lender, last week predicted that house prices will fall 15-20 per cent by the end of 2009. In total, almost £20bn of Northern Rock's £90bn loan book is expected to be in negative equity by the end of next year, making it unlikely that those customers will be able to remortgage.

Negative equity raises the prospect of the Government having to repossess large numbers of people's homes. At the end of last year, Northern Rock had 2,215 homes in possession - just 0.29 per cent of its 730,000 customers. But by the end of December, 0.57 per cent of the mortgage book was three months or more in arrears. By the end of April, that was 0.95 per cent. Chairman Ron Sandler said in May the figure will "move much closer to the industry average... in the coming months". The Council of Mortgage Lender average is 1.34 per cent.

Credit rating agency Standard & Poor's last week predicted that as many as 1.7m UK households could be in negative equity by 2009.

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I bet Alistair Darling is glad Milliband will be the Chancellor having to defend the "quality loan book" assertion at the next select committee hearing.

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Guest KingCharles1st

we can extrapolate that throughout the whole lending business.

Thats going to be around a third of mortgage holders in NEQ by Christmas.

I forecast a really shitty 2009

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Guest sillybear2

They should have let this pile of shit collapse, or dumped it into the laps of the other banks, HM Treasury should have made it clear it couldn't care less if there were runs on every bank in the country, that would have scared industry into clearing up a mess of its own making.

I cannot see why NR is any more deserving than MG Rover.

Edited by sillybear2

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20% of NR customers facing Negative equity . . . . . . . . . . . . . . . . . this week.

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They should have let this pile of shit collapse, or dumped it into the laps of the other banks, HM Treasury should have made it clear it couldn't care less if there were runs on every bank in the country, that would have scared industry into clearing up a mess of its own making.

I cannot see why NR is any more deserving than MG Rover.

Here Here.

AFP

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With a 125% Mortgage some will have been in NE before they picked up the keys

no such thing as a 125% mortgage, it was a 90-95% mortgage with a personal loan up to the 125% max. Tiny minority of borrowers maxed it out and if you were clever you could really make it work to your advantage. Average NR ftb loan over past 2 years was 105K on a purchase price of 120K. Assuming a ten per cent rise in value up to 135K over that time, to then collapse by 35% it ain't end of world situation is it; 105K mortgage on a place worth 85K? The focus is too much on NR/FTB which is a red herring, there are much bigger issues facing NR than the headline screaming FTb 125% mortgage, (BTL for example) rather cleverly and conveniently it's working for them now in diverting attention from their core borrower....

Here's an example of so many of my friends locally, who (with the help of NR) moved up over past two years from 250K sale with 150K equity and piled the profit into 400K house then goes up to 450-500 sorted, result!!. But a 35% correction takes 'em (near enough) right back to GO with a (what'll be for them) a jumbo mortgage of 250K....ouch :(

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I cannot see why NR is any more deserving than MG Rover.

Because (from the government's perspective) the potential victims of leaving NR to the wolves are greater in number and more likely to be potential Labour voters.

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They should have let this pile of shit collapse, or dumped it into the laps of the other banks, HM Treasury should have made it clear it couldn't care less if there were runs on every bank in the country, that would have scared industry into clearing up a mess of its own making.

I cannot see why NR is any more deserving than MG Rover.

Agree with you on letting NR collapse.

As to Rover vs NR. THe problem with Rover is that they were lagging behind european companies in design, and had a substantial legacy of work practises that were poor. Rebuilding a UK engineering segment is very hard, it takes a long time to train an engineer.

Growing a mortgage bank, on the other hand requires no skills at all.

MG couldn't have been saved because the UK couldn't support it, neither could we expect to export cars with a currency that was artificially high due to North Sea oil. But I feel NR shouldn't have been saved either.

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Guest sillybear2
Growing a mortgage bank, on the other hand requires no skills at all.

In which case there will be plenty of competition that will eventually spring up in its place, there's nothing worthy about NR that needs saving or preserving. As we both agree, it's interesting how 'free markets' apply differently to the banking industry than everything else in the country.

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They should have let this pile of shit collapse, or dumped it into the laps of the other banks, HM Treasury should have made it clear it couldn't care less if there were runs on every bank in the country, that would have scared industry into clearing up a mess of its own making.

I cannot see why NR is any more deserving than MG Rover.

good point about rover.

goes to show how the mew-debt-retail machine is critical to the newlab economy,

-which isnt a real economy. even less so without rover.

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They should have let this pile of shit collapse, or dumped it into the laps of the other banks, HM Treasury should have made it clear it couldn't care less if there were runs on every bank in the country, that would have scared industry into clearing up a mess of its own making.

I cannot see why NR is any more deserving than MG Rover.

we know, we know, but there were obviously bigger reasons that they couldn't let it fail and won't let any UK/Euro bank fail.

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Agree with you on letting NR collapse.

As to Rover vs NR. THe problem with Rover is that they were lagging behind european companies in design, and had a substantial legacy of work practises that were poor. Rebuilding a UK engineering segment is very hard, it takes a long time to train an engineer.

Growing a mortgage bank, on the other hand requires no skills at all.

MG couldn't have been saved because the UK couldn't support it, neither could we expect to export cars with a currency that was artificially high due to North Sea oil. But I feel NR shouldn't have been saved either.

That was the Tories fault for screwing with Honda in the 80's and selling Rover off to the Germanys who saw it as a threat. Ran it into the ground and then walked away job done.

Rover should have been saved to try and preserve our manufacturing base.

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That was the Tories fault for screwing with Honda in the 80's and selling Rover off to the Germanys who saw it as a threat. Ran it into the ground and then walked away job done.

Rover should have been saved to try and preserve our manufacturing base.

Don't agree the eighties were the decade for north sea oil. I don't think any oil exporters build cars. They were right to let Rover fold. However, the money from oil ought to have gone into a sovereign wealth fund, and into recreating the manufacturing industry for the 21st century. Instead the city was given free rein, and we're reaping the results.

Optobear

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"At the end of last year, Northern Rock had 2,215 homes in possession - just 0.29 per cent of its 730,000 customers. But by the end of December, 0.57 per cent of the mortgage book was three months or more in arrears. By the end of April, that was 0.95 per cent. Chairman Ron Sandler said in May the figure will "move much closer to the industry average... in the coming months". The Council of Mortgage Lender average is 1.34 per cent."

So if 0.29% of 730,000 is 2215 homes in possession by NR

does that mean the CML says banks combined OWN :

12,000,000 x 1.34% = 160,800 homes ?

(I'm assuming there are around 12 mill homes with mortgages) .

Are they empty ?

Not being auctioned to prevent more of a glut ?

Or what ?

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NR have been underwritten by the government who want their money back pronto.

This means that borrowers who can get a mortgage with someone else are being encouraged to leave. The consequence being that the only customers left will be the ones in neg. eq. and on the SVR after their fixed terms run out.

The consequence is that the Tories will be repossessing a whole bunch of poor sods from around 2010 onwards.

Nice legacy.

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  • 399 Brexit, House prices and Summer 2020

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      • down 5% +
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      • up 5%



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