Repossessions by nationalised lender Northern Rock soared by 63% last year, new figures have revealed.

The firm held 3,620 repossessed homes at the end of 2008 compared with 2,215 a year earlier, the group's annual report showed.

The figures came as Northern Rock confirmed pre-tax losses of £1.36bn for the year. The lender's repossessed stocks peaked at 4,201 at the end of September, before easing back slightly towards the end of the year.

The state-owned bank says repossession is a last resort and has committed not to seize an owner-occupied home for at least six months after they fall into arrears.

But the overall rise during 2008 is due to Northern Rock being left with riskier customers as the bank drove higher-quality borrowers elsewhere to pay off its huge Bank of England loans.

The plans to shrink the business saw its overall residential mortgage book fall 27% to £66.7bn, but arrears jumped sharply.

A total of 17,264 of its borrowers are three months or more in arrears - nearly five times as many as a year earlier. The bank's infamous Together mortgage - which lent up to 125% of the value of a home before being pulled in February 2008 - now accounts for 29% of its mortgage book, up from 24% a year ago.

"Together customers on average have a higher loan-to-value and, therefore, in current market conditions, can find it more challenging to move their mortgage to another lender," the bank said.

Northern Rock took £23.6bn out of the mortgage market last year as customers moved elsewhere, paying off £18bn of the £26.9bn it owed the Bank of England in the process.

But the bank will slow the pace of its redemptions in a bid to ease the current mortgage drought and last week announced plans to offer up to £14bn in new lending over the next two years.