Troubled mortgage lender to be shrunk

According to recent reports the chief executive of what was once the fifth largest mortgage lender in the nation has decided to scale down operations to try and halve the size of the bank.

Northern Rock hit problems last year after it became widely known that it had taken an emergency loan from the Bank of England, which resulted in the bank becoming the fist victim of a run on a British bank for around 140 years.

The bank was recently nationalised, coming into public ownership, and the man that was put in charge, Ron Sadler, said that he plans to cut the size of the bank by 50%.

In a bid to try and get the ailing bank to break even within the next three years, Sandler has laid out stringent plans to make cutbacks to Northern Rock operations.

His plan is to reduce the mortgage book of the bank from the current figure of £107 million to just £50 millions by 2011 Up to £30 billion worth of mortgages with Northern Rock could be up for renewal or subject to increased interest rates over the course of this year, and Northern Rock is trying to push some of its mortgage customers onto rival banks and lenders in order to try and reduce liabilities.

As part of his plans to downscale operations at Northern Rock Sandler plans to renew only 40% of mortgage redemptions that come up. He also plans to put an end to commercial and unsecured lending. Around two thousand staff members could lose their jobs as a result of these cutbacks, and costs will be cut by 20%.

He plans to repay the billions of pounds owed to the Bank of England by 2010. In a damning report over the true scale of Northern Rock’s losses last year it was revealed that in total consumers withdrew over £12 billion from the bank over a short period of time when the lender ran into problems last year.