Northern Rock turns away six out of ten remortgagers
Northern Rock’s new chairman, Ron Sandler, intends to reduce the bank’s assets, which are basically its mortgage book, from a current level of £107 billion to around £50 billion, by 2011.
The lender, which has already begun to discourage new borrowers, has between £25 billion and £30 billion of mortgages either due for renewal or reverting to higher interest rates, in 2008.
It plans to renew only around four in ten such mortgages and will also be winding-up its unsecured lending and commercial lending businesses.
Further cost reductions will be achieved by cutting around 2,000 jobs.
The measures are aimed at allowing Northern Rock to repay the £24 billion it owes the Bank of England, by 2010 and return to profitability by 2011.
Mr Sandler is forecasting that the bank will remain “significantly loss-making” this year.