It’s been twelve months since nationalised bank Northern Rock started sending out letters to customers, advising them to move their business elsewhere as it tried to reduce its mortgage book and repay its debt to the government.
For some customers, this was easier said than done. Despite better mortgage loans available elsewhere, to leave the bank customers would still have to pay a penalty charge for moving before completing the fixed term agreement.
The nationalised lender recently announced that it was starting to offer loans again but many customers, who are often in negative equity, are still stuck with the lender due to this penalty policy.
Northern Rock’s troubles started with the offer of their Together mortgages, which essentially meant customers took out a mortgage deal with a small deposit, or no deposit at all at the same time as an unsecured loan.
The long term consequences of this are now apparent with recent figures showing that the number of those having problems with payments is on the increase.
The number of Northern Rock mortgage customers who are three months or more behind with their payments is higher than the national average of 2.39 per cent, with an average of At 3.92 per cent.
This figure has increased since December and is much higher than the high street bank Barclays who recently reported that the percentage of their customers in the same position was just 1.16 per cent.
The number of Northern Rock customers in negative equity has also risen since December, but Northern Rock has pointed out that with interest rates so low, mortgages are still very affordable but may mean that many are stuck in the same property as they are unable to move whislt in negative equity.
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