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Thursday 18th of September 2008
May 13, 2008

Loan facilities reducing say Northern Rock


by Kay Murchie
”Loan

Ron Sandler, who was appointed by the Government to revive Northern Rock, said solid progress has been made against the business plan.

The Bank of England loan facilities are reducing and the balance sheet is contracting as a result of planned mortgage redemptions, added Mr Sandler.

Mr Sandler’s strategy is to reduce the mortgage book. He has set up a panel within the bank to help people coming to the end of their fixed-term mortgages to switch to another lender.

The bank said more of its customers are defaulting on mortgage repayments and added that the future for the UK mortgage market remains highly uncertain.

Arrears of three months or more increased from 0.57% at the end of December to 0.95% at the end of last month.

Mr Sandler added while arrears have increased, the credit quality of the loan book remains satisfactory and at a level assumed in the plan.

We remain fully focused on repaying the Government debt, releasing the guarantee arrangements and, in due course, returning Northern Rock to public ownership, continued Mr Sandler.

Newcastle-based Northern Rock 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.

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

Finally, the bank has commenced talks with staff over plans to axe 2,000 jobs.

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