In a trading statement, it says mortgages 3 months and over in arrears were 0.95 per cent at the end of April, in comparison to 0.57 per cent at the end of December.
Northern Rock says it has now strengthened its procedures regarding mortgage arrears capitalisation. It has decided that the controls over its policy to permit discretion in certain circumstances to capitalise amounts in arrears when the borrower has paid less than three monthly payments have been inadequate.
Under revised procedures, any such discretion has now been removed. It says that this change will result in higher reported arrears in coming months, with its performance here expected to move much closer to the industry average.
The lender says that this change does not reflect any change in the underlying quality of Northern Rock’s mortgage portfolio, as demonstrated by the low level of realised losses which the company has experienced on its mortgage portfolio over many years.
Northern Rock says it has established a panel of intermediaries to assist maturing borrowers in searching the market for a new mortgage product to meet their needs. It says it intends to develop this panel further in the months ahead.
The lender saw gross residential mortgage lending in the first quarter at £1.2bn. Retail savings balances ended the quarter at £12.8bn.
Executive chairman Ron Sandler says: “I am pleased to report that solid progress has been made against our business plan. The Bank of England loan facilities are reducing and the balance sheet in contracting as a result of planned mortgage redemptions. While arrears have increased, the credit quality of the loan book remains satisfactory and at level assumed in the plan.”