A new dawn for Northern Rock

Feb 23 2009 by Graeme King, The Journal

NORTHERN Rock will today be re-launched as a 'good bank' with around £14bn to boost mortgage lending.

Chancellor Alistair Darling is planning to announce the move today – marking a stunning turnaround for the bank a year after it faced going under.

Last month The Journal launched a campaign calling on the Government to give the Rock a role in restarting the crumbling British economy.

Whitehall officials last night revealed to The Journal that £5bn will be made available for lending this year, with up to a further £9bn from 2010 onwards depending on how much is needed. Newcastle Central MP and Treasury Select Committee member Jim Cousins hailed the move as the biggest vote of confidence in the North East for the last 30 years.

The new lending will be made on commercial terms to ensure it represents good value for money for the taxpayer, allowing Northern Rock to return to the mortgage market with a wide product range.

And to enable the bank to focus on new lending, its back book of mortgages will be managed separately – although the move will require approval from European Union competition chiefs.

New lending will be financed partly from deposits and repayments on the existing loan book and partly through an increase in the Government loan to Northern Rock and by lengthening the repayment schedule.