Northern Rock to announce substantial loss

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Northern Rock To Announce Loss - Yahoo! News UK

[Legal Beagles]

Northern Rock losses reach almost £600m after leap in defaults by mortgage holders

Northern Rock today announced losses of £585.4million for the first six months of this year as the number of people defaulting on their mortgage payments leapt sharply.

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[Legal Beagles]

Northern Rock's losses climb to £600m as economy weakens

Nationalised bank warns it will be 'significantly loss-making' for rest of year as number of borrowers in three-month arrears more than doubles

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[enaid]

Re: Northern Rock losses reach almost £600m after leap in defaults by mortgage holder

Northern Rock announces £585m loss


Press Assoc. - 31 minutes ago Northern Rock announced losses of £585.4 million for the first half of this year as the number of customers falling behind with mortgage payments jumped sharply.
The recently-nationalised lender said its bad debts provision stood at £351.8 million as 1.18% of its mortgage book slipped to more than three months in arrears at June 30 - more than double the amount at the end of 2007.
But the former bank said it had managed to repay £9.4 billion of the Bank of England loans, taking the amount owed at the end of June down to £17.5 billion.
Northern Rock's executive chairman Ron Sandler said: "The external environment has deteriorated and the consequences of this for Northern Rock are increased credit losses."
Northern Rock said the number of properties in its possession jumped from 2,215 at the start of the year to 3,710 at the end of June.
In a further sign of customers finding it harder to make ends meet, the lender also said it was increasing staff numbers in debt management from 185 to around 500.
Before running into funding problems last summer, Northern Rock was one of the UK's biggest and most aggressive mortgage providers, advancing loans worth as much as 125% of home values.
But with house prices estimated to fall by up to 20% by the end of next year, tens of thousands of its customers could be left in a position of negative equity - where the value of the mortgage exceeds the house price value. That could make it difficult for them to find other sources of finance.
Northern Rock was nationalised in February after the Government failed to find a buyer for the business that provided "sufficient value for money to the taxpayer".
Under a recovery strategy outlined earlier this year, Mr Sandler promised to repay the Bank of England loans by the end of 2010. He also planned to halve the balance sheet to £50 billion by the end of 2011 by stopping all business lending and accelerating mortgage redemptions for existing customers, and warned of "significant losses" for the lender in 2008 as the credit

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Re: Northern Rock to announce substantial loss

the long and short of this all is that we are all pretty much in deep doo doo if like me you bought around 2/3 years ago

[argentarius]

Re: Northern Rock to announce substantial loss

The impact of bad debts on the Northern Rock situation has been exaggerated in all the media reports on the NR losses.

Bad debts amounted to c.£200m out of the c.£600 loss. Not even a majority.

The main reason that NR is losing money is identical to the reason that A&L's profits have fallen from c.£300m to £2m in the first half of 2008 - nothing to do with bad debts, and all to do with increased funding costs due to the credit crunch.

Indeed, because vast amounts of NR's funding is from the government, the losses it is incurring are notional ones - what's actually happening is that the government is getting a higher than expected rate of return on the money it's loaned to NR.

Even the extra capital which the government has injected into NR is a bit of a debatable thing - if the government was charging NR less for the funding, NR wouldn't be making a loss and it wouldn't require the additional capital.