Mortgage fears grow at Northern Rock

| May 30, 2008 | 0 Comments

An internal memo at Northern Rock has unveiled that the crisis-torn bank is expecting to see a vast increase in the amount of customers struggling to pay off their mortgage over the next 12 months.

As a result, the bank is proposing to more than double the number of people who work in its debt management arm from 176 to 444.

The bank, based in Newcastle, was taken into public ownership after the Government rejected takeover bids from the board of Northern Rock and a consortium led by Sir Richard Branson’s Virgin Group.

As a consequence of a slowing economy and rising food and fuel costs, homeowners are struggling to repay their mortgages and, as is the case at Northern Rock, other mortgage lenders are expecting to see an increase in the number of customers defaulting on mortgage repayments.

Northern Rock recently commenced talks with staff over plans to axe 2,000 jobs by 2011. The number of customer service staff is expected to be trimmed as a result of fewer customers. Staff selling mortgages is to fall by half and other departments such as training and IT are experiencing job losses.

The memo was seen by BBC Radio Newcastle. Commenting on the detail, a spokesperson for Northern Rock said in the interests of openness and transparency, Northern Rock believes it is right to update staff on a regular basis throughout the consultation process with Unite and other employee representatives.

The indicative figures noted in this staff communication are subject to the consultation process and exploration of any other viable alternatives, added the spokesperson.

Earlier this month, Ron Sandler, who was appointed by the Government to revive Northern Rock, said solid progress has been made against the business plan and as things currently stand, Northern Rock would be able to repay the £26.9 billion Bank of England loan by the end of 2010.

It has recently been confirmed that shareholders of Northern Rock have commenced legal proceedings against the Government to claim compensation for nationalising the bank as they believed it was still a viable company.

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