Taxpayer backs "Toxic" Loans from Northern Rock

12.00.00am GMT Tue 27th Nov 2007

Chris Huhne today slammed the Government for continuing to allow Northern Rock to lend "toxic" loans worth far more than the value of people's homes. Mr Huhne called on the Chancellor to put a stop immediately to the practice, which would just throw more public money after bad.

"With more than £24 billion of taxpayers' money at risk in Northern Rock, it beggars belief that the Chancellor is still allowing the company to extend loans worth a quarter more than a value of the borrower's home.

"This is financial betting on the grand scale. Northern Rock should not be allowed to gamble with taxpayers' money, yet that is exactly what Alistair Darling is approving at the bank" said Mr Huhne, formerly a City economist.

"Darling should end this practice now.

"It is now an open secret in the City that Northern Rock has lent £8 billion in such unsecured loans in addition to its mortgage lending.

"This is another example of the utter inexperience of Alistair Darling and his Treasury team in business and markets. There is no one among them with business experience: there is one lawyer, two trade union organisers, one lobby group economist, and a football administrator. It shows."

Mr Huhne said that the bank should be nationalised temporarily until it is clear exactly what its loan book contains.

The type of loans offered by Northern Rock are described on this website, including substantial unsecured loans on top of conventional mortgages secured on a home: www.northernrock.co.uk/mortgages/together.asp

The site says: "How together mortgages work. Together is different to a normal mortgage. It works by combining your secured mortgage with an unsecured loan at a single interest rate with one monthly payment. This combination can be worth up to 125% of your home's value."