Charities and opposition MPs have urged ministers to act after it emerged that Northern Rock is repossessing 50% more properties than the industry average.

Shelter said ministers had a “moral duty” to help people stay in their homes while the Lib Dems said the figures were “difficult to swallow”.

Gordon Brown pledged more help but said ministers did not run the business.

By the end of September, the state-owned lender had 4,201 seized homes, up from 2,215 at the end of last year.

Northern Rock rejected suggestions that its approach to repossessions was “overly aggressive”, saying the measure was only ever used as a “last resort”.

‘Perverse’

But charities have expressed anger that after being bailed out by the government last year, Northern Rock’s repossession rate in the first half of 2008 was double that of the industry as a whole.

Shelter said repossessions should only occur if “absolute necessary” and that people should be given every assistance, including free independent advice, to help them stay in their homes.

“People get their household finances in a mess and they can be straightened out through quite simple measures like deferring a payment here or cutting some costs there” Nick Clegg, Lib Dem leader

“It seems a bit perverse that ministers who a few months ago were lecturing lenders about their responsibility towards homeowners in arrears are now allowing companies that are state owned to repossess people’s homes so aggressively,” said its chief executive Adam Sampson.

“We realise the government cannot avoid all repossessions but it must ensure a dignified and planned exit from mortgages that are held by the newly nationalised banks and hopefully try to allow people to stay in their homes wherever possible.”

In July, Northern Rock said the number of borrowers three months or more in arrears on their mortgage payments had doubled in the first half of the year as economic conditions worsened.

Experts said Northern Rock’s repossession rate was likely to be higher than average as it offered more 100% and higher loans than most lenders and since many of its less vulnerable customers remortgaged elsewhere after the firm was nationalised.

Government support

The government announced a £300m package of measures in September to help people stave off the threat of repossessions.

Help is being offered for people on benefits to pay interest on their mortgages while people will be able to sell all or a share in their property to a housing association or other social landlord, enabling them to remain in their property.

Mr Brown acknowledged that more homeowners were finding it hard to meet their payments and said the government was looking at further ways to help borrowers through the benefits system.

But he deflected criticism of Northern Rock itself, saying it was “important to note that it is at arm’s length from government”.

“It is not a company we are running on an everyday basis,” he added.

The Lib Dems said lenders should be under a legal obligation not to issue repossession orders until they had explored every means of helping people, including renegotiating their loans.

“People get their household finances in a mess and they can be straightened out through quite simple measures like deferring a payment here or cutting some costs there,” said leader Nick Clegg.

“That is probably the best way to make sure we do not simply move to this default position of mass repossessions up and down the country.”

News reported by The BBC

The government rescue of Northern Rock bank last year has pushed up the level of the national debt.

In August, net government debt stood at £633bn which was 43.3% of the nation’s economic output, known as GDP.

A year ago, the level of state debt stood at £507bn, or just 36.4% of economic output.

The Office for National Statistics (ONS) said most of this was due to the cost of buying Northern Rock and taking on its liabilities.

Nationalisation

The near-insolvent Northern Rock was formally nationalised in February.

However, the ONS has now revised its monthly state borrowing figures back to October 2007, to include the effect of the bank’s bail-out in the national debt.

That was when the Rock was first included in public finances as a result of the rescue operation mounted that summer and autumn by the Bank of England and the Treasury.

By the end of June this year, the government had loaned directly the Northern Rock £21bn.

However, the liabilities taken on through the Rock’s takeover have boosted the national debt by much more – pushing it up by £92bn last October.

The Bank of England’s extra financing to the banking system because of the credit crunch, known as the Special Liquidity Scheme, may also be included in public finances as well.

However the ONS said it had not yet come to a decision on how to do this.

Record borrowing

In August alone, net borrowing by the government rose by a record monthly sum of £10.4bn as it sought to finance its own spending.

The figure was higher than expected because weak growth in tax revenues, due to the economic slowdown, had not kept pace with increased public spending.

Earlier this year the chancellor Alistair Darling predicted that he would have to borrow an extra £43bn this year.

But so far, in the first five months of the financial year he has already borrowed £28.2bn, suggesting he may well exceed his target.

“If recent trends are sustained, borrowing would reach £64bn for the year as a whole – almost 50% higher than the government’s £43bn target and well above the record deficit of £51bn in 1993,” said Andrew Goodwin of the Ernst & Young ITEM Club.

“And with the economic outlook likely to worsen over the coming months there is a good chance that the outturn could be even worse,” he added.

News reported by The BBC

Northern Rock has announced that it expects to make about 1,300 staff redundant – fewer than expected – as part of its restructuring plans.

It hopes to limit the number of compulsory redundancies to 800, while 500 staff will leave voluntarily.

The bank said it expects to be left with an estimated 4,000 staff.

Northern Rock was nationalised at the beginning of this year after it was hit by a shortage of funds as a result of the credit crunch.

“We are pleased it is not the 2,000 job cuts that had previously been talked about” Graham Goddard, deputy general secretary, Unite union

“Confirming job losses is never easy,” said Northern Rock’s executive chairman Ron Sandler.

“This remains a very tough time for our staff but the restructuring of the company is nearing completion and we are now in the final phase of this difficult process,” he said.

Opportunities

The bank had previously said it intended to cut up to 2,000 staff by 2011. It had been one of the biggest employers in the north-east of England with a workforce of 6,500.

The Unite union said it was disappointed that there had to be any compulsory redundancies. “But on a positive note, we are pleased it is not the 2,000 job cuts that had previously been talked about,” said Unite deputy general secretary Graham Goddard.

The announcement came at the end of a consultation process between Northern Rock and staff representatives.

The North East Chamber of Commerce said it was disappointing news but asserted that there were other job opportunities in the region, particularly in the banking sector.

“The Newcastle Building Society announced plans to recruit another 250 staff and there are employers in the financial sector aware of the Northern Rock situation that are looking to take on more people,” a spokesperson for the chamber said.

Last September, a lack of liquidity in the money markets forced Northern Rock to go to the Bank of England for emergency funding. Savers withdrew millions of pounds from the bank in the following few days – the first run on a British bank for more than a century.

News reported by The BBC

Northern Rock has appointed the vice chairman of Barclays, Gary Hoffman, as its new chief executive.

Mr Hoffman replaces current chief executive Andy Kuipers, who will leave on August 31 after 20 years at the Newcastle-based lender.

Mr Kuipers is the final member of Northern Rock’s original board to leave the bank after last year’s crisis.

Northern Rock was nationalised in February following the first run on a British bank in more than a century.

Mr Hoffman’s basic salary is £700,000 and he will also receive three separate payments of £400,000 in compensation for the loss of his participation in Barclays’ long-term incentive plans.

“I am excited by the prospect of leading the company back to a position of strength,” Mr Hoffman said.

Educated at Cambridge University, Mr Hoffman, 47, joined Barclays 1982 and previous roles include chairman of UK banking and chairman of Barclaycard.

Shake-up

Since being nationalised in February, Northern Rock has said it will cut about 2,000 jobs by 2011 and reduce its residential mortgage lending by half.

Ron Sandler, the former Lloyds of London boss appointed by the government to run the bank as executive chairman when it was nationalised, will became non-executive chairman when Mr Hoffman takes up his role in October.

Northern Rock’s previous chief executive, Adam Applegarth, resigned in December following fierce criticism of his role in expanding the former building society too quickly.

Northern Rock doubled its share of UK mortgage lending under Mr Applegarth, but ran into difficulties in September when it was no longer able to fund that mortgage lending by borrowing in wholesale money markets.

News reported by The BBC

LONDON (Reuters) – Britain’s battered smaller banks and other lenders are ripe for merging to create a bigger, stronger bank, but fragile markets and a grim economic outlook are likely to delay consolidation until some stability returns.

Bradford & Bingley (BB.L: Quote, Profile, Research), the UK’s largest lender to landlords, is at the sharp end of concerns about smaller banks as it nears a 400 million pound cash call set to be backed by other banks but snubbed by its army of small shareholders as concerns over bad debts deepen.

An acquisition of B&B would solve a headache for regulators and the industry, removing the threat of a repeat of last year’s embarrassing collapse of mortgage lender Northern Rock.

Analysts and bankers say rivals Alliance & Leicester (ALLL.L: Quote, Profile, Research) and other lenders like Paragon (PARA.L: Quote, Profile, Research), Bristol & West (BKIR.I: Quote, Profile, Research), Cattles CTT.L and smaller building societies would all benefit from being pulled together. There are also multi billion-pound closed books of mortgages held by top investment banks that could be included.

Potential buyers or consolidators are watching with interest as valuations plummet, bankers and sources familiar with the matter, but they are not confident enough to pounce yet.

“It’s very difficult to make deals happen because share prices are just so volatile. You could start negotiations and two days later the share price is 20 percent lower,” said James Eden, analyst at Exane BNP Paribas. “And all the banks think they are worth more than the current price.”

The logic for bringing together several of the smaller banks or other lenders would be to cut costs, strengthen their capital base to withstand shocks, improve credit ratings, and reduce funding costs at a time of tough wholesale markets.

The most public move so far has come from entrepreneur Clive Cowdery, who wanted to inject 400 million pounds into B&B and use it to spearhead consolidation of smaller lenders.

News reported by Reuters

The Bank of England will tomorrow publish its annual report and accounts, which will disclose that the £19.3bn of loans made to Northern Rock is still on its books. However, the Treasury said on Friday that the Northern Rock loans would be transferred shortly to the Government’s own balance sheet.

The Bank’s annual report for the year to March, which will be tabled in Parliament before its release to the public, is being published later than usual following a hectic few months that saw the setting-up of the Special Liquidity Scheme to ease the problems of the banking system. For now, the £50bn scheme is being treated in the accounts as an “off-balance” sheet item because the loans will be transferred to the Treasury, which is financing them with new gilts.

The scheme was put together in April by the Bank’s Governor, Mervyn King, and Paul Tucker, the head of the markets division, to get the banks to start lending to each other by providing them with loans in return for collateral. Although there has been some increase in lending, many of the high-street banks are still lobbying the Bank of England to put more funds in the scheme, arguing that it has not gone far enough to restore confidence. Libor, the main lending rate between banks, has stayed stubbornly high, which is still putting banks off borrowing.

In return for new loans, the Bank accepts triple-A rated securitised bonds guaranteed by mortgages and credit card debt. One of the possibilities being discussed is whether the Bank would accept the extension of the scheme to include mortgages written this year; the cut-off point is currently December last year.

The Bank’s accounts may also show that Northern Rock is repaying its Bank of England loan faster than projected in its restructuring plan. According to Simon Ward, chief economist at fund manager New Star, the Northern Rock loan was down to £24.1bn by 31 March and has been repaid mainly by mortgage redemptions.

News reported by The Independent