Tuesday, March 3, 2009

This is a dead parrot

Northern Rock makes record £1.4bn loss

Nationalised bank Northern Rock has confirmed that it made a loss of £1.4bn in 2008, but says it is making "good progress" against its objectives. It also said home repossessions jumped by 63% last year, while mortgage arrears soared by 80%. The bank said that 17,264 mortgage accounts were now in arrears, up from 3,492 at the end of 2007. Almost 3% of its mortgage book is now in arrears, well above the industry average. Northern Rock said today that it was developing mortgage rescue solutions to limit repossessions and has pledged not to take possession of a property until at least six months after a customer has fallen into arrears. It has repaid £18bn of the £27bn loan it received from the government last year. This policy will now be reversed and Rock will be growing its lending.

Posted by little professor @ 09:07 AM (1033 views)
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9 thoughts on “This is a dead parrot

  • The bad bank in disguise.

    Wreckless? You have not seen anything yet!

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  • They just don’t get it do they! Today Northern Rock announced a £1.3 billion loss last year, it had to borr and £26.9 billion from the tax payer last year, £894 million of the £1.3 billion loss was due to borrowers defaulting on their mortgages. The banks have confirmed that 17,264 mortgage account are now in arrears AND RISING due to its reckless mortgage lending. Yet Gary Hoffman, the chief executive, said: “The Government loan has been reduced significantly, we can now return to what we do well — mortgage lending.”
    Clearly we ALL need to define what doing something well means!!! 5 million property owners are about to slide into negative equity due to reckless irresponsible lending that allowed house prices to inflate 190% in 10 years. Mortgage lending will now be regulated and loan to income fixed at 3.25 (median) or 2.5 two wages, house prices are going to have to fall considerably and will not return to 2007 levels for a long time, 190% rise should have taken 40 years in line with wages. So what does Gary Hoffman believe the Rock has been good at?

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  • The bank can only lend to people wanting to borrow. Those wanting to borrow do so because they have no choice. They will default and this whole debacle will cost the taxpayer billions more. Yep – that is definitely returning to what they do well…

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  • Sold My Soul To The Never Never Never says:

    Surely mortgage arrears have soared by 400%! That is how they would interpret the figures if it was a house price rise?

    From 3492 to 17264 mortgage accounts in arrears. An 80% increase would be a total of 6285.

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  • There is no analysis of arrears by NR, but I think that may folk were taken by surprise at the speed and devastation of the Credit Crunch! The daily body count of redundancies has, I suspect, a large part to play in mortgage arrears.

    A lot of people do not have cash put aside for emergencies. There are many reasons, poor budgetting being a big one.

    Expect arrears to rise in 2009 across all lenders, as the job cuts announced in the last few weeks filter through into payment defaults.

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  • mark wadsworth says:

    With hindsight, until the recent U-turn, NR was actually doing very well – it was encouraging good borrowers to go elsewhere and repaying the taxpayer loan ahead of schedule. It was more or less the perfect example of the closed fund – run off – bad bank model. For sure, NR’s arrears ratio is climbing because it keeps the people who can’t remortgage, but so what? That was the whole point, to segregate out bad loans from good loans.

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  • Source – MortgageSolutions http://www.mortgagesolutions-online.com/public/showPage.html?page=842996

    Increased lending puts N Rock at risk

    Datamonitor has warned the Government has reached a mortgage market crossroads, with Northern Rock at risk as a result of its plan to offer more mortgage products.

    The firm highlighted that while the guarantee that Northern Rock will offer new mortgage products seems a good idea, it could lead to considerable problems for the troubled lender.
    Robert Mattai, retail banking analyst at Datamonitor, noted that with certain lenders, including Lloyds Banking Group, facing significant losses, the Government was trying to help improve their loan portfolios by increasing market liquidity through the new Northern Rock initiative, which will see the state-owned lender commit £14bn to mortgages over the next two years.

    He added: “However, this could prove to be a problem for Northern Rock. The calibre of low quality and sometimes non-standard customers to whom Northern Rock lent mortgages to have inevitably led to this situation as these borrowers are often the hardest hit in a recession.

    “Approximately 18,000 out of the bank’s 600,000 customers are at least three months in arrears. This figure of 2.9% is well above the industry average of 1.88%. The worsening economic climate will force a higher number of its existing borrowers into repayment difficulties and hence raise the current 2.9% figure. Taking on new borrowers will only exacerbate this and put the bank into greater risk of moving into financial distress.”

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  • Forgot to mention the NR Together mortgage range was the worst performing in the loan book, going from 0.95% at the end of 2007 to 4.53% at the end of last year.

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  • I like the phrase: “now we can return to what we do well – mortgage lending”. Hate to think of what something they do badly would look like. Cars in which the interior dimension is 125% of the exterior? Wines with 125% alcohol levels?

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