Troubled mortgage lender Northern Rock has revealed a new strategy to start lending to more homeowners in a bid to help kick-start the economy.

The bank is slowing down its rate of mortgage redemptions after announcing the aggressive method of encouraging customers to remortgage with other lenders when their fixed-rate deals ended had reduced its government loan ahead expectations.

Now rather than encouraging existing customers on fixed-rate mortgages to find new deals with others, Northern Rock will be supporting Government policy to increase lending capacity in the market and will aim to keep customers.

In a statement, Northern Rock said: "A key objective of the company's original plan was to repay its Government loan, primarily through a programme of accelerating mortgage redemptions.

"This has been achieved by actively encouraging existing customers to remortgage to other lenders, when their fixed-rate product deal ends.

"This has been very effective and has enabled the company to reduce the Government loan well ahead of the business plan.

"Reflecting this, and in order to support Government policy to increase mortgage lending capacity in the market, the company confirms that it is slowing down the rate of mortgage redemptions.

"This means that more mortgage customers will be able to stay with Northern Rock. A reduced level of redemptions will lead to Northern Rock repaying its loan to Government at a slower rate.

"There will be no impact on savings customers of Northern Rock as a result of this decision and all Government guarantees remain in place."

The move was originally part of the business plan agreed with the Government to meet European state aid rules but those leaving Northern Rock were putting pressure on the credit available at other banks.

The new strategy is part of a wider rescue package to save failing banks with a second bail-out in three months.

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