Nationalised bank Northern Rock has reported a loss of ?1.4 billion in 2008 due to write-offs on its mortgage loans.
While the loss may seem devastating, the bank has made progress in repaying the Government loan, having cut the amount owed from ?26.9 billion to ?8.9 billion. Plans to increase mortgage lending are in place, with ?14 billion planned to be lent out in the next two years.
Last year, the bank repossessed about 4,000 of its borrowers? homes, accounting for 10 per cent of all repossessions. Northern Rock?s stock of repossessed homes rose from 2,215 to 3,620 at the end of 2008, resulting in a 63 per cent increase from 2007.
“Northern Rock has made good progress against the business plan objectives laid out in March 2008,” said chief executive Gary Hoffman.
The huge annual loss has been attributed to not just the huge mortgage write-offs Northern Rock had to do, but also to exceptional expenses such as redundancy payments and losses on its own investments.
The number of mortgage borrowers has dropped from 777,000 to 591,000 and with many borrowers likely to fall into negative equity, with some possibly losing their jobs or falling behind, the bank could see even more losses occurring.
“Unfortunately, given the external economic backdrop, it is likely that repossessions will continue to be a feature of the market over the coming year,” said Mr Hoffman.
Northern Rock will hope that their new way of mortgage lending will help them in repaying their Government loan. This includes increasing its lending to even existing borrowers; previously they wanted to get rid of them.
