STRICKEN bank Northern Rock has seen its mortgage lending levels plummet to damaging lows over the past two months, it emerged yesterday.

According to experts, the Newcastle- based bank has seen mortgage lending fall by as much as 80 per cent after it was forced to ask the Bank of England for an emergency loan facility.

Northern Rock, which sells the majority of its mortgage business through brokers, has increased interest rates and withdrawn more than 100 products since mid-August, when the crisis began.

Experts are now predicting that the bank's net mortgage lending could slip into negative territory before the end of the year, with the group in danger of losing existing borrowers as well as new customers as its deals become less competitive.

The slowdown in business is a stark contrast to Northern Rock's share of the market before its funding dried up.

The bank took a fifth of all new lending in the UK in the first six months of the year, but has seen its market share drop dramatically, brokers say.

John Malone, managing director of Premier Mortgage Service, said: "The downturn in volume was a very much expected, predicted event. Quite simply because they re-priced some of their products and withdrew some and made sure their products were not as attractive for a period of time."

He said his firm, which links mortgage intermediaries with lenders, was Northern Rock's biggest source of new business.

He said the group generally facilitated lending of about £500m to £700m a month, with a high of £950m in one month. But new business through the group fell to £250m in September and Mr Malone expects the figure for last month to be even lower.

Other brokers said Northern Rock's business had fallen by as much as 80 per cent as the group axed products or made them less attractive, with higher rates and higher fees in some cases.

Northern Rock has borrowed billions of pounds from the Bank of England, leading to the first run on a bank in nearly 150 years.

But the group's woes may be resolved if it can find a buyer.

A consortium led by Sir Richard Branson's Virgin Group, and US private equity firms JC Flowers and Cerberus are the three suitors looking at a rescue deal.