Nationalised bank Northern Rock is to make £14 billion available for new mortgages by 2011, it has been announced.

The move follows Chancellor Alistair Darling's decision last month to reverse the wind-down of its loans, and is part of wider plans to restructure the group.

It is understood the Newcastle-based bank is to take on about £5bn in new mortgages this year and up to £9bn from 2010.

The Chancellor said the bank is already well ahead of schedule on its government-borrowed money - with £9bn outstanding at the end of December compared to £27bn a year earlier.


The plan, which is due to be finalised this week, will see the taxpayer underwrite the so-called "toxic" assets held by banks in an effort to get the flow of credit moving again.

Ministers are also expected to move towards a policy of "quantitative easing" - or printing money - providing tens of billions of pounds to buy bonds and gilts from banks.

"It's repaid about £18bn of the loan the government made, and I said in January this year that because of the problems the mortgage faced, instead of looking to wind down its business, it would be better for Northern Rock to maintain lending," Mr Darling said.

Northern Rock collapsed in 2007 after a run on savers' deposits when it emerged it had sought government help.

When the bank was nationalised last year it pledged to reduce the amount of state aid it would borrow.

However, last month the bank was given more time to repay the government loan as part of a scheme to boost lending.

(JM/BMcC)