Northern Rock is planning to more than double the number of people working in its debt management business in a move that will spark fresh fears of widespread repossessions over the coming year.
An internal memo reveals the stricken mortgage bank is expecting to see a huge increase in the number of customers struggling to pay off their mortgage over the next year.
Northern Rock is having to cut costs following its nationalisation in February.
Around 2,000 staff at Northern Rock face redundancy under the government’s cost-cutting programme.
The plans will add to growing concerns about the pressures faced by homeowners as mortgage bills rise alongside energy costs and food prices.
House prices have fallen by 4.7 per cent since the beginning of the year.
Northern Rock’s cost-cutting proposals will see the size of the workforce fall from 5,485 people to 3,440 over the next three years. The bank remains the biggest victim of the credit crunch in the
Northern Rock said that the document obtained by the BBC was intended for internal use.
"In the interests of openness and transparency, Northern Rock believes it is right to update staff on a regular basis throughout the consultation process with Unite and other employee representatives," it said.
"The indicative figures noted in this staff communication are subject to the consultation process and exploration of any other viable alternatives."
The Newcastle-based bank had primarily relied on borrowing from money markets, rather than its own deposits, to fund mortgage lending. As the credit squeeze took hold it struggled to finance its business model.
The move to seek emergency funding from the Bank of England triggered the first run on a UK bank in more than a century.
Earlier this month, the executive chairman of Northern Rock, Ron Sandler told MPs that, as things currently stand, Northern Rock would be able to repay the £26.9bn Bank of England loan by the end of 2010.
The bank expects to repay about £7bn of the loan by the end of 2008, he said.