Partner Article

Rock borrowers under equity threat

About a fifth of Northern Rock mortgage customers face the prospect of negative equity next year as house prices continue their slump, according to reports. Around 5% of borrowers with the Newcastle-based lender already have a bigger mortgage debt than the value of their home, the Daily Telegraph reported.

With house prices estimated to slide by up to 20% by the end of 2009, another 15% of mortgage holders are likely to find themselves in the same situation, the paper said.

This equates to around 140,000 homes whose owners 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 the bank’s previously-announced plans to cut 2,000 staff by 2011.

On a more positive note, Northern Rock bosses are expected to reveal that its Bank of England loan, which stood at more than £24bn in March, will have been reduced to just over £19bn, the Telegraph said.

Northern Rock’s executive chairman Ron Sandler has promised to repay the Bank of England loans by the end of 2010.

This was posted in Bdaily's Members' News section by Ruth Mitchell .