The Northern Rock bank in Newcastle followed in the footsteps of many others in the financial crisis. It collapsed in the year 2007 when its reliance on government help became known. Upon its nationalisation in 2008, the bank made a pledge to improve its situation and minimise its reliance on government aid.
However, part of its plan is to encourage increased borrowing and obtain an extension on its own loans from the Government. In January the bank was provided with an extended period to repay its current ?27 billion loan. This is justified as part of the Government’s broader economic plan not only for the bank, but also for the country as a whole.
Northern Rock projects the revival of its mortgage business to stand at up to ?14 billion by 2011, all from new loans. On the way to this goal, the bank expects to take about ?5 billion in new mortgages during 2009, and as much as ?9 billion during 2010.
According to Chancellor Alistair Darling, refinancing Northern Rock is part of a wider plan to rebuild the economy via the banking system. In this light, the Chancellor believes that it is better to maintain lending.
While some hold high hopes for the plan, Shadow Treasury Minister Greg Hands foresees difficulties when the plan is implemented. He said: “I think there will be a contrast between existing customers who are facing repossession with all these thousands of new customers who are getting very generous terms.”
