A BUY-to-let mortgage lender has emerged as a surprise contender to buy nationalised bank Northern Rock.

Paragon has requested information about the sale of Northern Rock, according to The Sunday Times, in a move that could see competition to buy the taxpayer-owned bank intensify.

Chancellor George Osborne announced the sale in his Mansion House speech last month, saying it was time for taxpayers to start getting some of their money back following the bank bailouts.

Other possible contenders to buy the bank include Coventry Building Society, Virgin Money, Co-operative Financial Services, and buyout vehicle NBNK.

Industry sources told the newspaper that Paragon could become a serious bidder. If it was successful, the deal would almost double its size and allow it to move into other sectors of banking.

Paragon was at the heart of the UK's buy-to-let boom, accounting for about one in ten loans to landlords, according to the newspaper.

It escaped the fate of its nationalised rivals Northern Rock and Bradford and Bingley after an investor cash call.

The group stopped lending in February 2008, but returned to writing new loans last year. Earlier this year it reported a 32 per cent rise in pre-tax profits to £71.8m.

Northern Rock was nationalised in February 2008 after it collapsed amid the credit crisis, sparking the first run on a UK bank for 150 years.

The Government split it in two last year, forming a mortgage and savings bank called Northern Rock Plc and Northern Rock Asset Management (NRAM) to house the more toxic loans.

It is the former half - the so-called good bank - which is preparing to return to private ownership. The Government will retain ownership of NRAM.

Although the Government has ploughed some £1.4bn into Northern Rock, it is thought the bank will only fetch about £1bn at best.

Industry experts told the newspaper the price could fall to between £650m and £850m because new rules demand that banks hold on to more of their cash. The regulations are expected to make banks less likely to need further bailouts but will also limit profits.