Northern Rock will reveal this week that roughly one in five of its mortgage customers faces negative equity next year as it unveils a substantial loss for the six months to June.

The number of customers whose mortgage debt is bigger than the amount they can recover from selling their property raises the deeply uncomfortable prospect of the Government repossessing people’s homes.

About 140,000 homes could be at risk – many of them in Labour’s North-East heartland, where Northern Rock was the dominant player. About 5pc of the nationalised lender’s mortgage book is already thought to be in negative equity, reflecting Northern Rock’s aggressive tactics of lending up to 125% of the value of a home in its last years as a private company.

Daily Telegraph