NORTHERN Rock is dropping two-thirds of its mortgage range in the first product shake-up since it applied to the Bank of England for emergency funding, it was revealed last night.

Amid talk of an impending takeover, which boosted its share price by more than ten per cent yesterday, the Newcastle lender said it was simplifying and streamlining its mortgage offering, as well as respond- ing to the current market conditions.

It is reducing the types of mortgages available, but there appeared to be little change to its general risk profile, with the group still prepared to lend up to 125 per cent of a property's value through a combination of secured and unsecured loans.

The development came amid reports that JC Flowers had raised £15bn and was preparing a bid for the troubled mortgage lender.

A spokeswoman for Northern Rock yesterday confirmed that the lender had spoken to a number of parties.

The speculation fuelled the first significant increase in the Newcastle lender's share price for more than a month.

After its share price sunk to an all-time low on Monday, with a price of 132p, nearly a tenth of the company's stock value in July. Last night, shares closed at 151.8p, sparking hopes of a resurgence for the stock.

Northern Rock's market valuation has tumbled to about £571m since it was forced to seek emergency funding - thought to be about £8bn - from the Bank of England. Subsequently, about £2.5bn was withdrawn by worried investors.

It has been revealed that JC Flowers, led by banker Chris Flowers, was granted access to Northern Rock's data room last week.

The development saw the firm emerge as the frontrunner to make a bid, ahead of rival private equity firm Cerberus, which was also rumoured to be interested.

Other previously interested banks, including Lloyds TSB, are no longer thought to be considering an offer.

However, while the takeover talk was welcomed by the City, unions said the bank remaining a single independent company would be the best outcome for its workers.

Earlier this week, Roger Lawson, spokesman for a group representing Northern Rock's shareholders, said the company would be "bonkers" to accept a takeover when the firm's value was at its lowest.

Yesterday, Graham Goddard, Unite deputy general secretary, said the union was continuing to meet Northern Rock regularly to try and gain assurances over its employees' futures.

"As the speculation about a buyout of Northern Rock continues, employees remain concerned about their future," he said.

"Unite remains convinced that the best outcome for our members is for the bank to remain independent as a single entity."

Rescuer with a fearsome reputation

The would-be rescuer of beleagured Northern Rock is little known in the UK but has established a fearsome reputation as a dealmaker across the Atlantic.

Chris Flowers, the head of New York-based private equity firm JC Flowers, specialises in deals involving financial institutions in trouble.

Mr Flowers was a partner at Goldman Sachs before leaving the investment bank a decade ago to form his own buyout business.

The 49-year-old Harvard graduate is now the 239th richest man in the US, according to business magazine Forbes, worth about $2bn (£1bn).

In 2000, he bought struggling Long Term Credit Bank - the first time a Japanese bank had fallen under foreign ownership - reportedly making about $1bn (£500m). He also sold Dutch bank NIBC to Iceland's Kaupthing in August for 3bn euros (£2.1bn) after leading a consortium to buy it for 2bn euros (£1.4bn) two years earlier.

Northern Rock would be his first major UK deal, although JC Flowers was rumoured to be looking at a potential bid for Friends Provident earlier this year.

But his latest US venture - a $26bn (£13bn) offer for US student lender Sallie Mae - was thrown into uncertainty this week after JC Flowers cut its original offer for the business, agreed in April.

The firm reduced the offer following new US legislation lowering subsidies to student loan providers. Sallie Mae has threatened to sue the private equity firm if it fails to honour the terms of the deal.