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A debt charity yesterday called on the Treasury to put pressure on Northern Rock to change its approach to repossessing properties.

Credit Action said that the nationalised bank was twice as likely as other lenders to repossess a home if borrowers fell behind with their mortgage repayments. Chris Tapp, director of the charity, said its eagerness to repay the government meant it was treating struggling customers harshly.

More than 19,000 homes were repossessed in the first half of this year, 4,000 of which were seized by Northern Rock.

The bank's chairman, Ron Sandler, said: "I would deny strenuously that we have been overly aggressive."

Since it was nationalised in February, Northern Rock has cut 1,500 jobs and reduced its lending to help repay the government. In the nine months to September 30 it had repaid £15.4bn of the £26bn it owes. However, the bank's mortgage arrears figures jumped by nearly 60% in the past three months.

Read more at Guardian Online

Labels: northern rock, uk mortgage market, uk repossesions

The market seizure caused by the near-collapse of Bear Stearns, America's fifth-largest investment bank, forced Bank of England governor Mervyn King to announce the special liquidity scheme on April 21.

It was intended to encourage banks and building societies to lend to each other, which they had been reluctant to do as a result of the run on Northern Rock a year ago. The problem was that big financial groups had lost their ability to raise funds by packaging up mortgages into bonds.

These became toxic in the US sub-prime mortgage crisis that started last summer and forced Northern Rock to its knees.

Through the SLS, banks and building societies were able to swap mortgage-backed bonds and other unwanted assets for attractive government paper (nine-month Treasury bills). The idea was to inject more liquidity into financial markets and encourage banks to do business with each other.

Read the full article at Guardian property news

Labels: Bank of England, bear sterns, Mervyn King, northern rock, US sub prime mortgage crisis