Northern Rock to slow mortgage redemptions

Troubled mortgage lender Northern Rock unveiled a new strategy today which will see it slow the rate at which it shrinks its mortgage book.

It means the bank will start lending to more homeowners in a bid to help kick-start the economy.

It involves Northern Rock taking less of an aggressive approach with existing customers on fixed-rate mortgages - who would have been encouraged to find new deals with other lenders.

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 massive 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.

In a statement, Northern Rock said today: "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."