NAO: Report into Northern Rock's lending practices

Richard Mason, Managing Director @ Moneyextra.com commenting on the announcement of the report by the National Audit Office into lending practices at Northern Rock said: "Northern Rock took a real kicking over its part in reckless lending to homeowners, and its cavalier attitude has helped march our economy into this recession. However, to simply call an abrupt halt to its practice would have been equally reckless.

"Prior its collapse, Northern Rock would have given a mortgage ‘promise' to many hopeful applicants looking to fund the purchase of a dream home; to abruptly renege on its promises would have caused untold misery to those applicants waiting to move.

"A systematic unwinding of Northern Rock's activity was sensible, as is an orderly return to sensible lending now."

Mason is urging homeowners who face debt arrears to downsize while they can, "It is far better to proactively arrange a sale on your own terms, than face repossession. Once the bank takes over, you are exposed to a whole host of problems, including additional debt which could be avoided by early action."

Mason is offering advice to consumers who are struggling with mortgage payments, in the form of three immediate steps:

1 - Consult your bank
"Stay alert to your financial situation, don't put your head in the sand, and alert your lender as soon as you're aware of any difficulties you may be facing. Your lender's specialist arrears team will work with you to find a solution that will alleviate your financial situation and help you repay the debt. Repossession proceedings are only initiated in extreme cases where borrowers don't communicate or collaborate with their lender."

2 - Climb down the ladder
"For anyone struggling to keep up with their mortgage payments, immediate action is always the best remedy. Extending the term of your mortgage and downsizing could save up to £500 per month on your repayments."

3 -Research currently available mortgage products
"Despite the perceived gloomy outlook, the number of mortgages has increased by almost seven per cent since the beginning of March, now standing at 2,915 schemes, and it is set to rise further. With interest rates at an all time low, there's never been a better time to snap up a mortgage bargain. Getting access to the right market information and best products is vital and customers need to seek out advice from FSA-recognised experts. Keep your eyes open, keep looking at the deals and remember that even a few months renting will save money compared to the triple debt whammy of repossession."