A report from the National Audit Office has criticised the Treasury for allowing Northern Rock to continue to offer 125% loans after it had been bailed out using tax payers funds. Unbelievably Northern Rock were allowed to continue bringing the banking system into disrepute throughout the period from September 2007 to December 2008.
Having learned absolutely nothing from it’s collapse, Northern Rock continued to operate in the same fashion that had bought about it’s collapse while using government money and under the watchful eye of the Treasury. Indeed during the period the bank allowed 1.8billion of risky loans through their ‘Together’ mortgage package.
The ‘Together’ mortgage offers 95% secured mortgage to it’s clients along with a further unsecured loan, which can be used for any purpose, up to a value of 30% of the house price.
At 31 December 2008, Together mortgages represented around 30 percent of the mortgage book but about 50 percent of overall arrears and 75 percent of (home) repossessions.
The Treasury has been further criticised for accepting the Northern Rock business forecast for future trading, with a plan that had assumed a 5% fall in UK house prices between 2008 and 2011.
Despite the UK government insisting that it will do everything within it’s power to avoid another ‘Northern Rock disaster’, the truth as everyone knows is very different indeed.
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