Northern Rock to Increase New Mortgages by £14billion by 2010

Northern Rock is to increase mortgage lending by £14 billion in the next two years. The bank has agreed a Treasury sponsored business strategy that will introduce around £5billion in new mortgage lending this year, and £9billion from 2010 onwards.

Today's announcement follows the Alistair Darling announcement January 19 of a series of measures designed 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.

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.

This will be achieved by a restructuring of the bank's management, whereby the back book of mortgages is managed separately to its other business. This restructuring aimed at allowing Northern Rock to focus on new lending 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.

Earlier this month the Centre for Business and Economics Research stated that the UK property market depression will be a lot worse if banks aren't approving 50,000 mortgages per week