May 27, 2008
Alistair Darling - are you sure about Northern Rock’s assets?
The Chancellor of the Exchequer reassured the world in the spring that Northern Rock’s assets were “good quality” as he set aside further billions of debt towards keeping the business going.
Even at the time this seemed odd, given the lender’s rush for market share last year at the top of the housing market. Among its products was the notorious 125 per cent loan-to-value mortgage, which has since ceased to exist.
My colleague Norma Cohen reveals this morning that repossessions at the Rock are racing ahead of its rivals. According to data from Standard & Poor’s, she writes……
“While loans originated by Halifax had a repossession rate of about 0.12 per cent as of March, those of Bank of Scotland had a repossession rate of 0.20 per cent while those originated by Northern Rock had a rate of 0.425 per cent.”
Here is the full article, which will make interesting reading for anyone who cares about the housing market, the economy and yes, UK politics.
Assessing the quality of a mortgage book is a fairly specialised skill set and, whilst it’s possible that Darling had someone sensible on the case I suspect that no one in the Treasure had the faintest idea as to the quality of Northern Rock’s book when they leapt in with both feet.
The marketing of mortgages with a daft loan to value ratio is not a good sign, though…
Posted by: Peter Dunkley | May 27th, 2008 at 6:35 pm | Report this commentDarling’s comments will mean that he will not be in a strong position to argue down the previous shareholders of Rock, when it comes to negotiating a fair compensation deal
Posted by: MIke Pearson | May 28th, 2008 at 1:31 am | Report this comment