Taxpayers could end up bailing out Northern Rock AGAIN amid fears it will default on £24billion debt

More than £24 billion of taxpayers' money lent to Northern Rock could be 'seriously' jeopardised if house prices fall sharply this year.

The warning, from the stricken bank's executive chairman Ron Sandler, raises fears taxpayers could be short-changed by the controversial rescue.

During a grilling by MPs, Mr Sandler said the bank's ability to repay the loan depends on the health of the housing market.

Northern Rock

Credit crunch: Fears are growing that stricken bank Northern Rock may be unable to payback the loan if the housing market crashes

If house prices fall by five per cent or more this year, this could cripple the bank's ability to repay the massive loan.

He said: 'If house prices were to decline five, 10, 15 per cent, that would seriously impede fulfilling the plan.'

In a worrying twist, the warning comes as the Council of Mortgage Lenders predicted today that prices could fall seven per cent this year.

Under the bank's plan, the loan will be paid off in full by the end of 2010. Northern Rock has so far paid back £2.8 billion.

Speaking to MPs, Mr Sandler insisted that the plan is currently on target.

He said: 'In the present housing climate, if things remain as they are, the plan can and will be delivered.'

Meanwhile  Mr Sandler defended his decision to continue sponsoring the Premier league football club Newcastle United.

Critics have raised questions about the multi-million pound five-year sponsorship deal which runs until 2010.

Given the financial crisis at the bank, which had to be bailed out more than £25 billion of taxpayers' money, many expected the sponsorship deal to be axed.

But the executive chairman Ron Sandler insisted the deal is in the "commerical interests'" of the nationalised bank.

He said there were no plans to ditch the contract despite the deal effectively involving taxpayers' money.

It is ending deals with county cricket clubs Middlesex and Durham, but continuing the sponsorship of the Magpies and the rugby team Newcastle Falcons.

Grilled by MPs, he said: "We have already ended a number of sponsorships that I inherited... but we have chosen to continue the sponsorship of Newcastle United and Newcastle Falcons, partly because of commitments we have entered into there - sometimes sponsorships continue until they come to a contractual end - and partly because I believe it is in the commercial interest of the bank that we should continue with both of these."

The bank has refused to reveal how much the sponsorship costs, or whether it is possible to wriggle out of the deal without incurring a huge penalty.


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