Is Northern Rock In Trouble Again?
After a period when troubled Northern Rock seemed to be getting itself back on a firm footing again there are signs that all may not be well at the Newcastle based bank. After the news that job loses are set to be increased to 2,000 (one third of the banks original 6,000 work force) there are concerns that the group may not be able to repay the governments loan in full. So what is going on?
Despite the public praise with regards to the £9.4 billion which has already been paid off, leaving £17.5 billion to repay, this has been possible because the bank has ejected many customers with good credit ratings to other banks. This has then led to mortgages being refinanced and Northern Rock being able to build up a substantial pot from which to pay down the government loan. However, this burst of activity has left the bank with a quandary - how do they now capitalise on the less credit worthy customers who have mortgages with the group?
It is hard enough for those with good credit ratings to get mortgages so there seems very little chance of any competitors taking on these lower level customers. As the mortgage default level continues to creep higher funds will become harder and harder to come by. This will turn into a major problem very soon.
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