Northern Rock to return to mortgage lending

Published 23rd Feb 2009

Nationalised bank will lend another £14bn in mortgages as part of government plans to rescue economy


Northern Rock will lend an additional £5 billion in mortgages this year, or about 1.9 per cent of the mortgage market based on last year's figures.

The nationalised lender will provide a further £14billion in mortgages over the next two years as part of government measures to tackle the economic crisis. It will make an additional £5 billion available in loans this year and a further £9 billion in 2010, as the Government tries to lessen the impact of recession.

A total of £256.4 billion was lent by British mortgage lenders in 2008.

The news comes as Royal Bank of Scotland, which is 68 per cent-owned by the taxpayer, is set to cuts tens of thousands of staff around the world and confirm the biggest annual loss in British corporate history.

Alistair Darling, the Chancellor, has reversed the rapid wind-down of Northern Rock’s loan book as it paid off £18billion of a £27billion debt to the Government last year.

Today’s announcement shows how keen the Government is to restore available credit to homebuyers and stimulate the housing market. Despite hefty cash injections using taxpayers’ money into several of the UK’s biggest banks, they remain reluctant to lend.

Mr Darling said that Northern Rock would be able to give mortgages of up to 90 per cent of a property’s value but he expected most to be “at a sensible level”.

He told the BBC Radio 4 Today programme this morning: “Northern Rock are not going to do 100%. They had their fingers very badly burned and, rather more importantly, a lot of their customers had their fingers very badly burned.

“They can go up to 90% but they will have to take that judgment on the individual circumstances.”

He added: “I have made it clear, and the Prime Minister made it clear at the weekend that I really have severe doubts about the 100%-plus loans that were made available. In this day and age, that is ridiculous.”

Vince Cable, Liberal Democrat Treasury spokesman, told BBC Breakfast: “The rules have got to be set out first, for mortgage lending, before Northern Rock is let off the leash.”

Source: ' Times '

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