Northern Rock

Northern Rock will increase mortgage lending by up to £14 billion over the next two years in plans announced today.
A new business strategy has been agreed that will see around £5 billion of new mortgage lending for 2009 and between £3 and £9 billion from 2010 onwards, subject to market demand.

The new lending will be made on commercial terms to ensure that it represents good value for money for the taxpayer. It will allow Northern Rock to return to the mortgage market with a wide product range.

To enable Northern Rock to focus on new lending, the company will be restructured so that the back book of mortgages is managed separately to its other business. The restructuring will be implemented subsequent to state aid approval.

The Government has made clear that it wants to see a well functioning mortgage market where lenders lend responsibly and borrowers have access to a wide range of mortgages that they can afford to repay. Government policy towards Northern Rock is a part of meeting these aims.

Notes for Editors

Today’s announcement follows Alistair Darling’s statement of 19 January 2009 in which he announced a series of measures designed to to reinforce the stability of the financial system, increase confidence and capacity to lend, and in turn to support the recovery of the economy. This included the announcement that Northern Rock would no longer actively pursue a policy of rapidly reducing its mortgage book.
As announced in August last year, the Government will be strengthening Northern Rock’s capital base by up to £3bn. New lending will be financed partly from deposits and repayments on the existing loan book and partly through an increase in the government loan to Northern Rock and by lengthening the repayment schedule.

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