Losses incurred by Northern Rock on repossessed homes soared nearly four-fold during 2008 as the economy deteriorated, figures show.
The nationalised bank saw the steep increases in losses on mortgages that are held in its Granite securitisation vehicle, which represents around half of Northern Rock’s total mortgage book.
Figures for December 2007 showed that Granite, which was set up to raise capital for the lender, had lost £10.2 million from repossessed homes since it was first set up in 2001.
By December last year however, the figure had mushroomed to £45.9 million – a 350% increase.
The securitisation vehicle made losses of £8.7 million from the properties during December alone, with an average £19,348 loss per property that was repossessed.
The repossession situation at Northern Rock, which has been criticised in the past for how it treats those who are in mortgage arrears, looks set to get worse this year with rising unemployment and the country in recession.
Around 6.3% of mortgages held by Granite are currently in arrears of at least a month.
Within this total, nearly 3% of borrowers are at least three months behind with their mortgage repayments, up from only 0.68% 12 months earlier.
Negative equity increases
Falling house prices meant rising numbers of homeowners found themselves in negative equity (see our mortgage jargon buster).
Around 3,719 borrowers were in negative equity in December, meaning that their property is now worth less than the mortgage they have secured against it
Also, the depressed housing market and the problems caused by the credit crunch restricted the options for people who still had equity in their homes to sell up and clear their debt (see our mortgage calculator to see if you could save money by re-mortgaging).
© Press Association 2009
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