Northern Rock free to lend again

"The Loans Search...."

It is time to "take the shackles off" Northern Rock and begin making funds available to new lenders, according to the nationalised bank's chief executive.

Gary Hoffman made the statement as Northern Rock announced up to £14 billion extra in new mortgages.

Though the bank has ruled out deals of over 95% on the property's value, such as its infamous Together mortgage which offered borrowers 125%, Mr Hoffman hoped to make 90% mortgages available to help first-time buyers.

Northern Rock - which expects losses of £1.4 billion for 2008 - was forced to turn away customers in order to pay off £26.9 billion in taxpayer loans that it accrued when the Bank of England announced a rescue package in 2007.

Mr Hoffman said the latest bid by ministers to stimulate the mortgage sector by encouraging Northern Rock back into the wider market with billions more in taxpayer funds would make a "small but important contribution" to the mortgage market.

"Net new lending shrank by around £70 billion (in 2008) and Northern Rock was responsible for around half of that fall.

"Having made very good progress against our objectives last year we are taking the shackles off Northern Rock," he said.

The plan will see Northern Rock lend around £5 billion this year and up to £9 billion more in 2010, depending on demand.

Chancellor Alistair Darling earlier told the BBC: "Northern Rock is going to increase its lending but this is against a background where a lot of the foreign-based banks have withdrawn.

"So what I want to do is use Northern Rock to help fill the gap but in the rest of the banking system we still have a job of work to do to make sure we can rebuild those banks for the future."

Mr Darling made the announcement a an ever more beleaguered economy continued to increase the number of borrowers defaulting on loans.

The bank has managed to pay back £18 billion to the Bank of England but said the losses were driven by a £900 million bad debt charge on its loan book.

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