Northern Rock ushers its customers to the exit

Nationalised bank Northern Rock has said that it aims to repay its £24bn debt to the Bank of England by 2010 and no later.

The embattled Rock is aiming to raise the funds by "encouraging" its mortgage customers to switch to other lenders. When this happens, the outstanding loan balance will be paid to the Rock, which in turn will redirect the cash to the Bank of England.

The Rock envisages that its total outstanding mortgage lending will fall from around £100bn today to £50bn by 2010.

The only practical way in which borrowers can be "encouraged" to remortgage away from the Rock is if its interest rates are kept high. And already, the bank's standard variable rate is well above the industry average.

However, Rock savers though can benefit from some of the best rates around as the bank tries to encourage a higher level of customer deposits to even up the ratio between the money it has leant out and what it gets in.

As part of a general scaling back of the Rock's business, chief executive Ron Sandler has already announced significant job cuts.

The bank announced last Monday that it has made a pre-tax loss of nearly £170m in the past year.