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Northern Rock makes huge half year losses

Nationalised Northern Rock losses are over £700m

Northern Rock logo

Nationalised lender Northern Rock has announced losses of £724m for the first six months of 2009, up 24% on the same period last year.

The bank said that the number of its mortgages which are three or more months in arrears is at 3.92%, well above the national average of 2.39%.

Northern Rock still owes government £10.9bn

The north-east based bank, which was nationalised in 2008, still owes the UK government almost £11bn after it was bailed out by public funds in 2007.Chief executive Gary Hoffman warned the outlook for the mortgage market ‘remains uncertain’.

‘The impairment charge going forward will be influenced by changes in house prices and the levels of unemployment,’ he said

‘The current environment continues to present Northern Rock with challenges particularly in managing the quality of its loan portfolios.’

Future of Northern Rock

Northern Rock was at the centre of the first bank run in 140 years in September 2007 as the credit crunch exposed its over-reliance on money markets.

The crisis forced it to turn to the Bank of England for £26.9bn in emergency funding. It was finally nationalised when attempts to sell it fell through.

It initially worked to pay back the loan with mortgage redemptions, encouraging borrowers to seek deals elsewhere. But this drained money from the mortgage market and in a change of plan earlier this year the bank is now increasing lending and delaying the repayment of the government loan. 

Today it said the loan would increase after its planned restructuring. The lender plans to split into two in order to smooth the path for a move back into the private sector.

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