After it was handed a multi-billion bail out by UK tax payers, the Northern Rock continued to grant 125% mortgages. A hard hitting report from the National Audit Office suggests that the bank lent 1.8 billion though high risk mortgages between September 2007 (the time when the Government had to step in) and February 2009.

In housing market where house prices were falling at about 20% per year, such massive mortgages start borrowers off in negative equity and market forces make that situation even worse.

Even just 5 months ago mortgages of up to 125% represented 30% of Northern Rock’s mortgage loan book. And 70% of the repossessions it made came from the same group of borrowers.

That means that whilst depositors were queuing up to get their money out and the government were pouring money in, the bank was still agreeing mortgages up to 125% of the property value.

And it is no as if the Government didn’t know! The Chancellor, Alistair Darling was challenged about the banks lending policies as late as February 2008 but nothing was done.

Thousands more borrowers may now be facing repossession because they were given excessive mortgages. But we should remember it takes two to tango. A person applied for the excessive mortgage and an irresponsible bank granted it.

It seems to me that whilst the banks were in the controlling seat by promoting these mortgages, the homeowners that took the mortgages must also bear some responsibility. What did they do with the “spare” 25% of the mortgage?

I presume they spent it.