Taxpayer's Rock bill may rise as repossessions soar

There were growing fears today that taxpayers could end up paying even more for troubled bank Northern Rock after it was revealed it was suffering from high default rates.

The number of borrowers with the bank falling more than 90 days behind on their mortgage payments has been rising at a much faster rate than the overall markets.

Repossession of mortgagees with Northern Rock also rose far more quickly.

The problem emerged via the £40billion offshore trust - Granite - that holds many of the nationalised bank's mortgages and gives bondholders monthly performance figures.

Granite is performing worse than similar organisations set up by other banks including Barclays, HBOS, Abbey and Alliance & Leicester.

Andrew South, the senior director for structured finance at Standard and Poor's, said the pain of a blowout in defaults would be felt by both Granite bondholders and the taxpayer.

He added: "The deteriorating book increases the chances that taxpayers, ultimately, might have to shoulder some of the cost."

Northern Rock suffered a huge panic by depositors in September last year which forced the Government to guarantee deposits and then nationalise the bank after failing to organise a rescue by the private sector.

It has so far repaid £9.4billion of government loans since being nationalised, cutting its outstanding debt to £17.5billion.

A spokesman for Northern Rock said that Granite was performing within its parameters and that investors were well aware of this and were protected by a reserve fund.

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