The government has announced an extension of Northern Rock"s mortgage lending, with the once-troubled bank planning to give £14bn in new loans by 2011.
The bank has already paid back £18bn of the government loan it received, and has spent several months restructuring itself while temporarily winding down its lending arm. However, given the current market conditions, according to Alastair Darling "it would be better for Northern Rock to maintain lending."
There is hope amongst analysts that Northern Rock will inject some of the cash that is so desperately needed by the economy. As Justin Urquhart Stewart at Seven Investment Management told the BBC, it is likely to be "the world"s most boring bank", but its increased capacity and potential new aura of trustworthiness may lead others to imitate it.
New mortgages are to be handled separately by the newly restructured bank, and will be financed with government money, new deposits and repayments on existing loans.
