Northern Rock to lend £14bn by end 2010

The government has announced that Northern Rock will be allowed to change tack and start to provide house buyers with mortgages again.

The state owned bank which was nationalised in 2007 with £27bn worth of government support was originally charged with the task of ridding itself of its mortgage customers in order to repay the government. It has been so successful at following this policy that it has reduced the outstanding government loan to £9bn, thus taking out £18bn from the mortgage market over the last year or so.

The bank will now split into two divisions with one managing existing customers and the other offering mortgage finance to new customers. It is proposed that new lending will be in the region of £5bn in 2009 and £9bn in 2010, however the boost to the market should be greater as it will no longer be sucking cash out of the market.