Northern Rock which was saved timely from collapsing by the government and nationalized just a year ago, revealed that its residential arrears were up from 2.92% to 3.67% which is actually two and a half times the industry average of 1.53%. Northern Rock persuaded its existing borrowers to remortgage elsewhere and even failed to reduce the standard variable rate along the lines of the bank rate cuts.
While the Northern Rock SVR has come down by 36%, from 7.49% to 4.79%, the bank rate cut was down by 90%, from 5% in October to 0.5% in February. Most of the borrowers who took out 100% or small deposit mortgages with Northern Rock were not able to Remortgage anywhere else because of strict mortgage conditions and dipping house prices wiping out their equity.
Gary Hoffman, chief executive, at Northern Rock, commented that Northern Rock is strongly dedicated to working with all the customers and help those who are financially burdened by offering the best possible support under present circumstances. He also stated that his bank is investing in debt management activities and hoping to see some signs of improvement in the arrears. The stock of unsold repossessed properties fell from 3,620 in December 2008 to 3,200 in March 2009, which reflects its debt management strategies, for example its participation in the Government’s Homeowner Mortgage Support Scheme. The net amount of its outstanding loan from the Government in March 31st was £9.8bn, a reduction of £900m since 31 December. The chief executive also said that though times are difficult, still the trading performance of their bank was according to their expectations, which also witnessed some early signs of increase in mortgage applications.