Northern Rock has repossessed 1500 homes in the past six months as borrowers with the failed bank are finding it harder and harder to keep up their mortgage repayments.

As it revealed a £585 million loss for the first half of 2008 compared with profits of £346 million in the same period in 2007, the bank, which was nationalised last February, said that the number of mortgages which are three or more months behind on payments had trebled in the past 12 months.

At the end of June 2007 the proportion of its customers with over three months' arrears had been well below the industry average of 1.05% at just 0.38%. Today it has virtually caught up with the rising industry average of 1.21% at 1.18%. In terms of customer numbers that is a rise from 2956 in arrears last June to 7796 this year. Total repossessed homes at the end of June were 3710.

As the entire housing market suffers, with HBOS and Alliance & Leicester reporting massive falls in profits last week, Northern Rock is seeing an extra hard squeeze due to the disciplines brought in by its Government-appointed chairman Ron Sandler. He has ordered much tighter controls, particularly in pursuing bad debts and is pushing borrowers coming off short fixed-rate mortgages to move to other banks. The size of the bank's debt management department will rise from 185 to 500 staff by the end of the year as it moves to tackle even more poor payers.

That is the only area the bank is growing, with 1300 job cuts confirmed last week. As the bank cut back massively on issuing any new mortgages under taxpayer ownership it swung from net lending of £13.3 billion for the whole of 2007 to a net inflow of paid-off mortgages of the same amount - £13.3 billion - in the first half of this year.

Much of that inflow is being used to repay loans from the taxpayer, which were cut by £9.4 billion to £17.5 billion by the end of June. Sandler said this was £3 billion ahead of his original target for the year-end.