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Bankers quizzed over crisis

Bankers quizzed over crisis

Category: Mortgages

Updated: 12/01/2010
First Published: 12/01/2010

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The chief executive of Northern Rock has revealed it is the much criticised 125% loan to value mortgage that lies at the root of the bank's high repossession and arrear figures.

Responding to Treasury Committee questions regarding the banking crisis, Gary Hoffman said that two thirds of the state-owned lender's repossessions and half of its arrears were attributable to the Together range of mortgages.

When asked about the overall position of Northern Rock Asset Management, the so called 'bad bank' created from the original bank's restructure, he said that of its 400,000 mortgage customers, the three month arrears rate stood at 4.11% at the end of last September but had stabilised in the final quarter.

However, arrears relating to Together deals stood at 6.89%.

Also in the firing line at the evidence session were the chief executive of Royal Bank of Scotland (RBS), Stephen Hester, and group chief executive of Lloyds Banking Group, Eric Daniels.

Amongst Mr Hester's submissions, he revealed his ambition to return RBS to private ownership remained on track to be achieved within the next three to five years. He also said it was unlikely the bank would have to call upon the Government's asset protection scheme.

Meanwhile, Mr Daniels told the committee that he had not been hoodwinked into the deal that saw Lloyds merge with HBOS, a move whose wisdom has subsequently been called into doubt.

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