Northern Rock To Repossess

Repossession by the Northern Rock have soared this year, with the trend likely to continue, the bank admitted yesterday.

Over the last year the number of repossessions on Northern Rock borrowers has increased by 234%. The bank repossessed on average 6 homes per day last year, compared to 4 per day in 2006.

Numbers of repossessions are expected to continue to rise this year as increasing mortgage costs hit customers who can't afford the repayments.

It is also estimated that a third of the bank's workforce, around 2,000 people, will lose their jobs by 2011, according to the management team.

Northern Rock Nationalisation 1 Step Closer

The government won the vote last night to nationalise the Northern Rock. Although the Lords had tried to make amendments to the bill on grounds that it could put tax payers' money at risk. The Lords did want an independent audit of the bank's books and the dealings to be brought under the Freedom of Information laws as well as an Office of Fair trading review over concerns over giving the bank an unfair competitive advantage. But they had to settle for government guarantees after loosing votes on the first 2 amendments.

The bill is expected to get royal assent today.

Northern Rock Ends 125% Mortgages

Northern Rock has followed other lenders and yesterday withdrew it's 125% mortgages. It will no longer offer this mortgage to new customers as it concentrates it's lending on low-risk customers and attempts to shrink it's book.

Many of the better quality loans in it's books are owned by another company, Granite, and are not part of the Nationalisation process. This along with customers who can moving away, leaves the bank with a poorer quality mortgage book for nationalisation.

Analysts are also worried about customers across the board with 100%+ mortgages where the deals are coming to an end shortly. Many of these will not be able to find new offers and could end up struggling to meet repayments. Only Birmingham Midshires still offers a 125% mortgage, and this is expected to be withdrawn.

Northern Rocks Future In Shareholders Hand's

Northern Rock Shareholders meet today in Newcastle to decide the company's future. With some shareholders backing moves to restrict the board's ability to offload the company without prior shareholder approval.

But analysts are warning that if such a move is approved, then the ability of a rescue deal to go through will be harder to achieve and this could result in the Government taking steps to nationalise the bank, reducing the worth to the shareholders.

The Government would prefer an existing interested party to take over the bank, but both are struggling to raise the required level of funding to cover the purchase. This means the government are more likely to have to become involved, although that does come with questions about breaching state aid laws.