NORTHERN ROCK, the British state-owned bank, is to receive up to £3.4 billion (€4.3 billion) in capital from the UK government after the bank reported losses of £585.4 million for the first half of the year as the property market slumped and mortgage arrears and repossessions rose sharply.
The bank said the UK chancellor would be converting £3.4 billion of Bank of England loans and preference shares in Northern Rock into ordinary share due to the deteriorating housing market.
The bank's first-half results reflected a dramatic deterioration in the UK housing market over the first six months of the year.
Home loan arrears over three months at Northern Rock more than doubled to 1.18 per cent of its mortgages in just six months.
Properties in repossession rose to 3,710 - almost 1,500 more than at the start of this year. The bank said its higher loan-to-value mortgages were "particularly exposed to house market deterioration".
Northern Rock executive chairman Ron Sandler said 70 per cent of customers whose homes were repossessed had fallen behind on its Together mortgages, which could have allowed customers to borrow up to 125 per cent of the value of a property.
New figures from the UK banking regulator, the Financial Services Authority (FSA), showed that the number of repossessions rose 40 per cent in the first three months of the year.
Northern Rock's bad debt charge rose to £351.8 million, or 0.42 per cent of loans, at the end of June from £243 million, or 0.25 per cent, six months earlier.
The bank reduced its borrowings from the Bank of England by £9.4 billion, or 35 per cent, to £17.5 billion over the six months.
The bank reduced its mortgages by 15 per cent to 662,000 at the end of June and in cash terms, loans and advances to customers were reduced by £14.5 billion to £84.4 billion.
Northern Rock does not break out its figures for the Republic.
Northern Rock was supported with emergency funding from the Bank of England when it ran out of funds last September, leading to the first run on a UK bank in 150 years.
