Fifth of Rock customers face negative equity

Aug 4 2008 Liverpool Daily Post

AROUND a fifth of Northern Rock’s mortgage customers face the prospect of negative equity next year as house prices slump, it was reported today.

About 5% of the nationalised lender’s customers already have a bigger mortgage debt than the value of their home, according to a daily newspaper.

And with house prices estimated to fall by up to 20% by the end of 2009, another 15% of mortgage holders are expected to be in the same situation by then, the paper said. This equates to around 140,000 homes.

Northern Rock is expected to unveil the deteriorating mortgage book position later this week as it unveils a loss for the six months to June.

But bosses are also expected to reveal that its loan from the Bank of England, which stood at more than £24 billion in March, will have been reduced to just over £19 billion, the newspaper said.

Customers falling into negative equity are likely to face difficulties remortgaging with another bank.

Northern Rock said last week it is to make around 1,300 redundancies as part of its efforts to shrink the business. The job cuts relate to previously-announced plans by the Newcastle-based business to cut 2,000 staff by 2011.