Mortgage lender pledges to repay loan within next couple of years

The recently nationalised mortgage lender Northern Rock has promised that it will repay its state debt of £24 billion by 2010. This is despite the fact that it has been warned that it will not even start to break even for at least three years.

In 2007 the mortgage lender suffered pre-tax losses of £167.6 million in 2007. It has also admitted that it will be ’significantly loss making’ over the course of this year.

Adam Applegarth, the former chief executive of Northern Rock is to receive over three quarters of a million pounds as part of his severance agreement.

This level of payout has received criticism from shareholders given the extent of the problems that the mortgage lender suffered last year, when it became the victim of the first run on a British bank in nearly 150 years.

Roger Lawson of the Northern Rock Shareholders Association Group, stated: “A lot of shareholders will be very unhappy with the size of Mr Applegarth’s payoff but it looks like legally, the company could not have avoided paying that amount. Had Mr Applegarth taken the company to court then it could have ended up having to pay him even more.”

The former fifth largest mortgage lender in the UK is now looking to make a number of cutbacks in different areas in order to reduce costs.

In respond to these cutbacks, a union official said: “Unite is calling on the company to ensure that any proposed restructuring must consider the welfare of employees and long-term success of the bank. Decisions must not be made merely in the pursuit of short-term cost savings.