NORTHERN Rock said “affordability”

would be the key criteria of its new lending plans as it revealed a 70 per cent rise in mortgage applications and more people choosing to stay with the bank.

The nationalised bank had been lending up to 125 per cent of the value of a property before its dramatic collapse in September 2007.

Yesterday, the bank revealed the average loan to value of new lending in the first quarter of this year was 48 per cent.

It comes as the bank prepares to offer £14bn of new mortgage lending, announced in February, over the next two years.

The announcement, which included £5bn of lending this year, was followed by a 70 per cent rise in mortgage applications last month after the bank improved the competitiveness of its mortgage products.

Yesterday’s figures do not take into account that new lending, with the first mortgage completions from that period likely to go through in the next month.

But the bank made it clear it reflected the new prudence driving its policies.

A Northern Rock spokesman said: “In taking on new lending we are going to be very mindful of quality, going to lend responsibly and going to hold affordability as a key criteria in any lending we make.”

The spokesman added: “I think it is important to remember that while we haven’t been doing a lot, we have continued to do some mortgage lending.”

The new mortgage lending was a dramatic shift in policy with the bank having previously actively encouraged customers to move to other lenders when their mortgage deals expired, as it attempted to pay off its Government loan of £26.9bn, which had been cut to £9.8bn by the end of last month.

Mortgage redemption rates slowed significantly in the first three months of this year and are running at around half the average rate of 2008.

The bank said it reflected steps taken to slow down the rate of redemptions and also the prevailing interest rate environment.

Following the expiry of their product deal, approximately 90 per cent of customers moving to Northern Rock’s standard variable rate are benefiting from a reduced monthly payment.

However, there was another jump in the number of its mortgage holders more than three months in arrears to 3.67 per cent up from 2.92 per cent by the end of last year and 1.87 per cent three months before that.

But the bank was seeing signs of improvement in the number of borrowers less than three months in arrears thanks to better debt management and lower rates.

Northern Rock signed up this week to the Government’s Homeowner Mortgage Support Scheme, which is designed to support households that have suffered a temporary loss in income by allowing them to defer up to 70 per cent of the interest on their monthly mortgage payments for up to two years.

The impact of the bank’s previous lending policies were made clear in its £1.36bn losses last year.

They were driven by having to write off £894m through customers defaulting on mortgages, personal loans and credit cards.