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Article in Debt Management Today

Economists have warned that Northern Rock are paying back their government loan back ahead of schedule, which could lead to intensifying the overall mortgage squeeze. According to calculations by New Star economist Simon Ward, the Rock may have already reduced their government loan to £20 billion which was a originally the target for the entire year.

The repayment is probably so high because of mortgage redemptions, according to Ward.

Ward estimates that if this rate of repayment continued at this pace it would mean a fall of £30 billion in mortgage lending in 2008 in comparison to last year. If consumers continue to take business away from Northern Rock so rapidly the effect could be severe. Last year Northern Rock provided around £13 billion of mortgage lending, whilst total UK lending stood at £108 billion this figure is still significant and will have impact when this lending is withdrawn.

Well NR hate their clients having debts they cant repay...so maybe NR hate owing money to their creditors too!! )

I actually believe that NR are heading for huge trouble that will ultimately mean the resignation of the chancellor because of his idea to nationalise.

Rationalle.

NR have a huge percentage of mortgages at 95% on fixed rates PLUS the unsecured proportion of the loans.

Many of these people have had a change in circumstance over the last 2 years ( rising petrol / food etc ) and they were already on the edge of affordability thus the 95% mortgage.

Well NR have said that they don't want them to renew with them and have made their rates uncompetitive.

The problem is that if house prices have reduced by 10% and possibly more in some areas, and mortgages have increased ( by perhaps a rate increase of 2%) Plus the increases in cost of living etc, then more people will question the sanity in remaining in their mortgaged houses.

If this happens I believe that NR will have a much higher rate of reposession / hand backs than other lenders and that coupled with their "together mortgage" loans will significantly damage their books.

Mr Darling may pay the political price but many more will pay more dearly.

Unfortunately I believe that we have a lot worse to come

Can't fault the logic there Paul and I would agree with you to a very large extent. Lets hope that things don't turn out to be as bad as feared, but it is certainly an area where a pessimistic view is well justified.

Regards.