Northern Rock Applies For Central Bank Funding

One of the UK's largest mortgage lenders, Northern Rock, has applied for emergency funding from the Bank of England.

The mortgage lender turned to the BoE as the "lender of last resort" after it struggled to raise money to fund its lending from commercial markets. However, it is understood that Northern Rock has not yet taken the money and, in a statement issued by the company, it stressed that the Financial Services Authority considered it to be solvent.

A statement issued by Northern Rock said it has "agreed with the Bank of England that it can raise such amounts of liquidity as may be necessary by either borrowing on a secured basis from the Bank of England or entering into repurchase facilities with the Bank of England.

"Such repurchase facilities would include securities that have prime residential mortgage assets as underlying collateral.

"On the assumption that the current conditions remain until the end of 2007, there will clearly be an impact on Northern Rock's 2007 asset growth and, therefore, on profits."

Northern Rock Chief Executive Adam Applegarth urged customers to remain calm and said that it was "business as normal" for the company.

However, it has been reported that queues have been forming outside Northern Rock branches with customers wanting to withdraw their money.

Northern Rock holds deposits of £24 billion from 1.5 million savers and lends to 800,000 homeowners.

(KMcA)