AN iconic £35m tower block being built as the centrepiece of Northern Rock's headquarters could be sold when it is completed, the bank's chairman said yesterday.

Ron Sandler said no decision had been made on the future of the ten-storey building, in Gosforth, Newcastle, which was to have created up to 1,000 jobs before the bank ran into trouble in September last year.

The building, due for completion this year, could house up to 1,500 workers and replaces the original Sixties seven-storey tower block, at the Regent Centre, which was demolished in 2006.

But Mr Sandler, appointed by chancellor Alistair Darling when the bank was nationalised in February, did not rule out that the tower could be rented or sold.

The bank yesterday did not speculate on the future of a second facility, on the Rainton Bridge Business Park, in Wearside, built to house 3,500 workers and due for completion next year.

Mr Sandler's comments yesterday came eleven days after confirmation of an expected 2,000 redundancies at the bank, most of them to be made this year.

Speaking about the Gosforth facility, Mr Sandler said: "The first bit of the plan is to finish it and when we have finished it, we are exploring a number of options from ourselves occupying it to selling it, to others occupying it, which is continuing."

It had been intended that the second building, in Rainton Bridge, would house 3,500 Northern Rock employees.

A Northern Rock spokeswoman said: "The building work continues there, but no decision has been made as to what the ultimate purpose of these buildings will be. We can't speculate at the moment."

Mr Sandler also said there was a possibility that other companies could be allowed to use Northern Rock's administration facilities.

He said: "We are exploring the possibility of collaborating with others, using our back offices and processing capability."

That would involve Northern Rock staff carrying out processing and administration for other financial institutions.

Mr Sandler was speaking as it was revealed the bank's mortgage arrears had risen.

Mortgages three months and over in arrears had gone up to 0.95 per cent, compared to 0.57 per cent on December 31, last year.

Mr Sandler said: "I don't think that any of what we are seeing is in any way connected with the fact we are in public ownership.

"There are a number of contributing factors, the general market conditions we see - a lot of borrowers have come to the end of their discount periods.

"The fact our mortgage book is compacting has some impact.

"We have tightened up on the application of discretion on how we calculate arrears and we are beginning to see the effects of that."

The bank has taken away the discretion to capitalise - or add arrears to the mortgage to be paid off over its lifetime - when a borrower has failed to make three payments in a row.

However, Ann Godbehere, the bank's chief financial officer, said that would not lead to more defaults.

She said: "Generally speaking people who are going to be unable to meet their mortgage obligations are going to end up in that place whether we capitalise their arrears or not."

Mr Sandler added that while arrears had increased, the credit quality of the bank's loan book remained at a level assumed in his business plan, announced in March.

He said the bank was on target to repay the £24.1bn it owed to the Bank of England by the end of 2010.

He said: "Nothing about the market place in the last six weeks has been unanticipated."