From This is Money:
However, while it had a chunk of customers with little equity, or none at all, it also had plenty of customers with good credit histories and substantial equity.
Since then a 20% fall in property prices has hit and this has caused major problems for those who took out mortgages with little or no deposit.
They are now in negative equity ? their mortgage is worth more than their property – and will find it difficult to remortgage or move home.
But being in negative equity does not mean you will default on your mortgage or lose your home, as long as you can keep up with monthly payments and preferably start overpaying to chip away at the debt.
And this is where Northern Rock’s bad debt problem comes in.
Northern Rock’s bad mortgage debts have been exacerbated by the decision to encourage remortgaging customers to leave Northern Rock following its nationalisation: with the carrot of telling them they could get better deals elsewhere and the stick of failing to lower standard va…