Nearly two years ago, September 2007, savers started the first run on a British bank for 140 years, the following February the bank was Nationalised with you and I becoming owners.

Northern Rock’s problem was their 'Together Mortgages', whereby they loaned up to 125% of the value of the home, part secured and part unsecured. The cost of borrowing to fund the enormous growth of the bank then started to climb and the bank could no longer meet its obligations.

Nearly two years on the bank reveals losses for the first six months of this year just short of ¾ of a billion, that’s 750 million pounds.

4% of their very large mortgage book is more then three months in arrears, national average is 2.38%. The proportion of customers in negative equity, this is when the value of a home is less than the amount owed on a mortgage, has risen from 33% at the end of 2008 to 39% now.

The bank still owes the Government through the bail out 10.9 billion, that’s nearly 15 times its losses so far this year.

Is it bad news when you compare these losses with Barclays and HSBC?

No, the other two banks’ profits have come from overseas investment, which Northern Rock does not do, they are a retail bank, mortgages and personal loans. These two banks also have problems with bad debts.

Northern Rock's future

At least the situation is stabilizing with the bank even though these are huge losses. The problem will be if interest rates go up as this may promote more house owners that have mortgages with Northern Rock to hand the keys in. This would then require the bank to have to sell the properties in a falling market and incur even further losses that will erode on any profits they generate, key is low interest rates for Northern Rock.

The bank also announced that it is to split into two, one part will be to develop a good bank with low defaulters and profit, this will then make it a more attractive buy for the private sector, the other part will take on the bad debts, mortgages and loans, and also be responsible for paying back the Government for the bailout, currently 10.9 billion.