Northern Rock today announced bigger-than-expected losses of £585.4m for the first six months of the year.

But it also managed to repay £9.4bn of a loan from the Bank of England, reducing the amount owed to £17.5bn.

Much of the loss came from the charges it takes to cover losses from struggling mortgage borrowers.

The government, which nationalised the lender in February after the first run on a UK bank in more than a century, will inject £3bn to help its finances.

Northern Rock revealed that the total percentage of its residential mortgage customers in arrears had risen sharply from last year.

In June 2007 the figure stood at 0.38 per cent of mortgages, but it has now risen to 1.18 per cent.