Now here's a big shock!
It turns out that we the British taxpayers could end up shelling out even more for Northern Rock than we have been told.
It turns out that the Newcastle-based mortgage lender which was once a pioneer of 125% mortgages and one of the most dominant lenders is now getting clobbered by much higher-than-average mortgage default rates.
Surprise, surprise!
Sadly though, Northern Rock is just the tip of the iceberg. The rest of the UK banking system, or certainly the bit that isn't effectively bust already, is getting set to slam down the loan window shutters as it runs short of money.
It is not looking like a happy 2009 for borrowers…
Northern Rock is suffering much higher-than-average default rates
We have devoted quite a few stories to the sorry Northern Rock nationalisation saga and this is not the place to go into the right and wrongs of what the financial authorities did
Would you return to Northern Rock?
Northern Rock wastes even more money
But if you are looking for any further evidence that offering 125% mortgages is a completely brainless idea, particularly if the lenders responsible proceed to scatter their cash around like confetti, the latest news reinforces the point perfectly.
It turns out that Granite, the £40 billion 'off-balance sheet securitisation vehicle' which holds many of the mortgages issued by Northern Crock, is anything but rock-solid.
Payment arrears of 90 days or more on mortgages on Granite's books jumped by 60% between this year's first and second quarters, according to the credit monitors at Standard & Poor's. That adds up to £508 million of dodgy mortgages, even though rival banks saw relatively small increases in delinquencies.
What's more, repossessions soared by 163% between the first and second quarters, again much worse than virtually every other mortgage lender.
The loan-to-value (LTV) ratio is another potential disaster. Average LTVs were 77% for Granite compared with 60% typically elsewhere, with almost 30% of Granite's loans at LTVs of 90%. That means a large chunk of borrowers will soon be dropping into negative equity territory as the housing market gets worse.
The latest Nationwide house prices survey said that UK home values have already plunged 10.5% over the last year after a further 1.9% fall in August, while the Bank of England's governor Mervyn King this month forecast "a significant adjustment" downwards in house prices.
How much will this cost us the British taxpayers?
Here's the bad news for us all. Any financial pain of a major blowout in defaults would be shared between Granite bondholders and Northern Rock.
Andrew South, S&P's senior structured finance director, said that "the deteriorating book increases the chances that taxpayers, ultimately, might have to shoulder some of the cost".
What? Northern Rock costing us all even more money than they have done already?
And if that's not enough, you'll be less than glad to hear that on top of the £40 billion Granite loan book, the Rock holds £37billion worth (on paper at least) - of mortgages on its own balance sheet, which it says are of similar quality.
Thanks, guys!
At the time of the Northern Rock nationalisation, the Government was advised by Goldman Sachs that the loss could be between £450 million and £1.28 billion.
And now? We dread to think…
But we think it will be a lot bigger than the higher figure, particularly as the UK’s economy gets worse.
It doesn't take a rocket scientist to work out why high-risk home loans have virtually disappeared off the radar screen.
What's happening to over-indebted mortgage borrowers is, in a rather painful way, a microcosm of what's happening in the wider world.
Are you annoyed about the prospect of yet more tax payers money being wasted by Northern Rock? Let us know.
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