Two thirds of Rock repos are Together mortgages
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Two out of three of Northern Rock’s repossessions stem from the controversial Together mortgage range, Northern Rock’s chief executive has revealed.
Gary Hoffman, chief executive of Northern Rock, told MPs today that the Together mortgage deals, which offered borrowers an LTV of up to 125%, are what is driving the high level of arrears and repossessions on the nationalised bank’s mortgage book.
He revealed that as at the end of last September three-month arrears in Northern Rock Asset Management, the ‘bad bank’ formed recently from the recent restructure of Northern Rock, stood at 4.11%.
This compares to an industry average from the Council of Mortgage Lenders of around 2.5%.
Hoffman told MPs: “I need to be clear that we would expect arrears to be that high given what the book is. We have talked before about Together; Together arrears are 6.89% so it is Together that is driving that.
“Together is a third of the book, half of the arrears, and it’s two thirds of repossessions.”
Hoffman told the Treasury Select Committee that in the second half of the year arrears had stabilised, and particularly so in Q4 last year.
He pointed out that since his last appearance in front of the committee last year Northern Rock had worked hard to improve its approach to forbearance and debt management.
Northern Rock Asset Management holds 400,000 mortgage accounts and out of this total Hoffman claims that 90% of these mortgage are performing well, with only 5% more than three months in arrears.
He says: “It’s not a bad bank. We are happy for those people to keep their mortgages with Northern Rock, it may not be the cheapest but it is not the most expensive.”
Hoffman says he is under no pressure to increase the mortgage holders rates in order to make a better return for the government.
MPs continue to hear from banking chiefs today as part of their ongoing inquiry into the banking crisis.
Stephen Hester, chief executive of Royal Bank of Scotland, faced down questions earlier today and revealed that the bank says yes to 90% of all mortgage applicants.
The committee will hear from Eric Daniels, group chief executive of Lloyds Banking Group, later today.
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Readers' comments (2)
Matthew Platt | 12 Jan 2010 3:40 pm
I think this figure would be lower if Northern Rock offered an alternative product once clients came to the end of the fixed rate period.
Alternatively if they didn't insist on hiking the unsecured element by 8% then many clients could remortgage the secured loan elsewhere and continue paying the unsecured to Northern Rock. The 8% hike in rate makes it very difficult to save the clients money this way.
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Anonymous | 14 Jan 2010 11:08 am
Agree with the above comment. I would have sold my flat for a small loss ages ago if this hike was not included and enforced. Now its just time to brave out revovery vs. interest rate increases
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