Northern Rock’s “Together” loans push up arrears

Northern Rock has revealed the extent to which its “Together” mortgage, which offered borrowers up to 125% of their property’s value, is putting pressure on its levels of arrears and repossessions.

“Together” loans, which were withdrawn in February, are a combination of a mortgage and personal loan.

They were particularly popular with first-time buyers who could fund their house purchase and have money left over to set up home or cover legal fees and stamp duty.

Yesterday, the bank’s non-executive chairman, Ron Sandler, reported that residential mortgages three months or more in arrears increased by nearly 60% over the three months to the end of September, compared with the previous quarter.

The rise puts the proportion of Northern Rock’s mortgage book in arrears at 1.87% by the end of September, up from 1.18% at the end of June.

Meanwhile repossession rose 13% during the third quarter of 2008, to 4,201 for the year so far, up from 3,710 in the first six months of the year.

Furthermore, the latest figures show that “Together” borrowers account for around one half of the bank’s mortgage arrears and three quarters of its repossessions.

In related news, Northern Rock says it remains ahead in repaying the £26 billion borrowed from the Government, with around £11.4 billion outstanding at the end of September.

However, the business is still significantly loss-making and some years away from returning to profit and thereafter, public ownership.

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