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New boss at Northern Rock

Crisis-hit Northern Rock’s website continues to offer loans to car buyers as a new chairman tries to organise a rescue plan. Speculation in financial circles is focusing on a possible injection of around £1.5 billion from Sir Richard Branson’s Virgin group.

Northern Rock’s APR lending rate has risen sharply on small loans, as have those quoted by many of its rivals. Last November the bank offered £2,000 at 5.75% over three years (£66.12 month, with payment protection insurance included). For a £10,000 loan over three years, the 5.7% APR (lower than most rivals’) meant repayments of £330.58. Now the comparative figures for North Rock loans are 8.9% on advances of both £2,000 (£71.30 a month) and £10,000 (£356.51).

Northern Rock will not make any comment about whether applications for private loans, for purchasing cars and other goods, have been affected by the crisis.

But the bank says “it is business as usual” on loans since Chancellor Alistair Darling assured savers the Government will guarantee deposits, which ended queues outside the bank’s branches. Other lenders’ rates have also risen as credit tightens and economists debate whether a global economic slump is likely.

Leading the attempt to save Northern Rock is new chairman Bryan Sanderson, who has previously headed Standard Chartered and BUPA.

Sanderson replaces Matt Ridley, chairman of Northern Rock when it was forced to ask the Bank of England to supply funds to be advanced as mortgages. The Rock’s providers stopped making the money available, apparently as a result of America’s sub-prime home loans crisis.

Some are tipping Sanderson as the right figurehead for a rescue by Virgin or other backers. He wants the Government and the EC to stay out of the negotiations, which he says are “complex enough”.

The departure of Ridley – reportedly without a pay off – is thought by analysts to pave the way for a Virgin-led consortium to take a controlling stake of at least 51%.

Virgin may bid to keep Northern Rock intact and merge it with its Virgin Money business.

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