Northern Rock sets tougher guidelines on lending

The nationalised bank Northern Rock has set much tougher guidelines for mortgage lending, it has been revealed. Despite ministers exhorting banks to lend more to kick-start the housing market, the government-controlled bank has set a cap of 2.1 times salary for poorer workers. Wealthier people are allowed to borrow 4.5 times salary, with a maximum of 4.2 times salary for wealthy couples. The arrangements are revealed today in a report by the Commons public accounts committee into the collapse of the Newcastle-based bank nearly two years ago. The report details a memo to MPs from Sir Nick Macpherson, permanent secretary to the Treasury, showing that Northern Rock will lend a maximum of 85 per cent on properties. Although this is higher than Treasury guidelines, which recommend 70-80 per cent of property values, it is considerably lower than the 125 per cent mortgages or six times salary dished out by the bank in the run-up to its collapse nearly two years ago.