Northern Rock is set to revive its mortgage lending business with up to £14bn in new loans by 2011, plans to be released on Monday are due to show.
Northern Rock is to revive its mortgage business with up to £14bn in new loans by 2011, the government has announced.
It is expected that Northern Rock will take on about £5bn in new mortgages this year and up to £9bn from 2010.
The Newcastle-based bank is expected to take on about £5bn in new mortgages this year and up to £9bn from 2010.
They will be financed with money from new deposits, repayments on existing loans and more government money.
They will be financed with money from new deposits, repayments on existing loans and more government money.
The move is part of wider government plans regarding the nationalised lender to be revealed this week.
The move is part of wider plans to restructure the nationalised lender and follows a government decision to reverse the wind down of its loans.
The bank collapsed in 2007 after a run on savers' deposits when it emerged it had sought government help.
'Chaos'
Restructuring
Investment analyst Justin Urquhart Stewart, of Seven Investment Management, welcomed the move and said Northern Rock could provide inspiration to other banks.
"They've been quietly off-market, being able to reconstruct themselves and be able to come back again and be able to provide a model - possibly as the world's most boring bank - for the other banks to try and imitate. For Northern Rock it is a bit of a vault-face because until now it had been under orders to wind up its mortgage operation and essentially to close down business Greg HandsShadow treasury minister
"And [it will] provide more capacity into the system so money starts being lent again and that's what the British economy needs desperately."
But Greg Hands, shadow treasury minister, told the BBC the reversal of policy showed the "chaos" at the heart of government decision making.
"We've been calling on the government for some time to free up credit in the economy and to make sure credit flows.
"However, for Northern Rock it is a bit of a vault-face because until now Northern Rock had been under orders to wind up its mortgage operation and essentially to close down business.
"I think there will be a contrast between existing customers who are facing repossession with all these thousands of new customers who are getting very generous terms."
State aid
Northern Rock collapsed in 2007 after a run on savers' deposits when it emerged it had sought government help.
When the Rock was nationalised it pledged to reduce the amount of state aid it would borrow.
When the Rock was nationalised it pledged to reduce the amount of state aid it would borrow.
In January Northern Rock was given more time to pay back its £26bn government loan as part of broader government efforts to boost lending, which it is hoped will boost economic recovery.
In January the lender was given more time to pay back its £26bn government loan as part of broader government efforts to boost lending, which it is hoped will aid economic recovery.
Previously the bank had been encouraging customers to re-mortgage with other lenders so it could pay off the loan quickly, but this policy will now be relaxed.
Previously, the bank had been encouraging customers to re-mortgage with other lenders so it could pay off the loan quickly, but this policy will now be relaxed.
To help the bank lend, the firm is to be restructured with new mortgages and existing mortgages will be managed separately.
To help the bank lend, the firm is to be restructured, with new mortgages and existing mortgages managed separately.
In the wake of the credit crisis, it has become increasingly hard and expensive for both individuals and businesses to borrow money.
Many analysts argue that improving access to capital is crucial to get the economy working again.
Many analysts argue that improving access to capital is crucial to get the economy working again.
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