The news that Northern Rock has lost £585.4 million in the first six months of this year shows how badly the mortgage industry has been affected by the credit crunch.
That loss, as bad as it is, does hide perhaps a more disturbing figure – a rising number of borrowers with mortgage arrears. In fact the number of Northern Rock borrowers falling into arrears has doubled to 1.18 percent.
As the mortgage squeeze and fall in property prices continue over the next 12 months, the number of people falling into arrears can only increase.
This will make Northern Rock’s financial situation even worse in the months to come. It is likely that Northern Rock mortgages will become increasingly uncompetitive as it strives to generate more profit in difficult market conditions.
Those Northern Rock customers with good credit histories will be able to move to other lenders, leaving the bank with an increasing number of difficult customers.
According to Louise Cuming, head of mortgages at moneysupermarket.com “This is a stark reminder that there is an ever widening gap between borrowers who are wanted and those who are not. Northern Rock is increasingly trapped with those in the second category and due to the Government’s commitment to the bank, it is taxpayers who will have to bail them out.”
You’ve guessed it. As taxpayers, we are all paying for the Northern Rock problems, and it seems that we will continue to fund their increasingly difficult situation for months to come.