October 2006

Northern Rock reassures the City that it is on track to meet analysts' forecasts for 2006, helped by strong lending and a robust UK mortgage market, adding that it expects bad debts to drop. Adam Applegarth, the chief executive, says: "Credit quality, in each of our loan books, has remained good and shows no deterioration.”

The shares, which have climbed 25 per cent during the course of the year, slip slightly to £11.65.

February 2007

Northern Rock predicts gross mortgage lending will hit £360 billion across the UK in 2007 despite fears from some economists that the sector could contract. The UK's fifth-biggest lender reveals profits of £627 million and record gross lending of £33 billion for 2006, giving it an 8.3 per cent market share.

April 2007

New Century Financial, the US firm at the centre of the sub-prime lending crisis, becomes the biggest casualty of the US housing downturn as it files for bankruptcy protection. The company, which had been one of America's leading lenders to people with poor credit histories, will cut 3,200 jobs, more than 50 per cent of its workforce.

On the same day, Northern Rock insists that residential arrears of over three months remain below half the industry average and that it sees no deterioration in its forward-looking behavioural credit scores.

Dresdner Kleinwort remains a buyer of the shares and says that Northern Rock's "underlying performance remains extremely strong".

June 2007

More than £480 million is wiped from Northern Rock’s market value after it tells investors that it is being hit by rising interest rates.

The lender claims that profits will grow by only 15 per cent as it is being hit by the time lag between agreeing fixed-rate mortgage deals with borrowers and hedging itself in the derivatives market. This hurts it in periods of rising interest rates.

Mr Applegarth tries to offset the tide of "sell" orders by promising a "notable hike" in the dividend, but the shares still end the day 12 per cent down. Mr Applegarth says the fall is “a tad harsh”.

August 2007

The mortgage bank raises rates on its sub-prime mortgage deals by 1.25 percentage points in a move that effectively prices itself out of the market.

Northern Rock insists that it has avoided debts connected to the US sub-prime crisis. The US investment bank Lehman Brothers underwrites Northern Rock's sub-prime mortgages in the UK.

Takeover rumours begin to swirl.

September 2007

Shares in the mortgage bank plunge by 24 per cent as Northern Rock warns investors that it will miss profit targets by up to £140 million. The warning follows the revelation that it has received emergency financial support from the Bank of England.

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