Rock improves ahead of its split and sell-off

Northern Rock yesterday said trading was showing a "significant improvement" ahead of its split into a good and bad bank at the end of the year.

In a third-quarter trading update the bank said three-month mortgage arrears were up to 4.11 per cent of the loan book from 3.92 per cent but the rate of increase was slowing. Chief executive Gary Hoffman also said that arrears of one or two months were slowing.

"That will filter through into the three-month figure," he said. He added that conditions were still "challenging" for the bank and that housing market improvement might not be sustained as more properties begin to come on to the market.

There is still a limited supply and mortgage approvals could be constrained if that changes because, Mr Hoffman said, some major players were not actively lending.

"The quality of the business we are writing is still very good. It is important that we are not relaxing our risk criteria or our commercial criteria but we have recently gone to higher loan to value for our loans. We have the confidence to improve that."

Gross mortgage lending during the quarter accelerated to £1bn as Rock sought to meet its 2009 target.