SHARES in crisis-hit mortgage lender Northern Rock slumped again today as traders speculated over the future of the company.

The Newcastle-based firm, the UK's fifth biggest mortgage lender, closed more than 11 per cent down after briefly surging 13 per cent higher earlier in the day amid market rumours of a possible private equity takeover.

Northern Rocks shares touched a record low during trading after weekend reports of a lack of buyers. City experts said the volatility would last as long as the uncertainty over the firm remained.

Panmure Gordon banking analyst Sandy Chen said: The shares could trade in a range of 1p to 400p and the longer it goes on the closer that will get to 1p.

Any sale is now expected at a discounted price. Hedge funds are seen as the most likely suitors, as many rival banks are believed to be put off by the lenders tarnished image and funding difficulties.

Northern Rock was forced to call on the Bank of England as lender of last resort earlier this month amid a meltdown in the wholesale money markets, on which it relies for most of its funding.

The news caused a run on the bank by savers worried that the bank would collapse.

Yesterdays fresh losses leave Northern Rock with a market value of £728m - just more than a quarter of its £2.7bn worth before the crisis began ten days ago.

But despite its financial woes, the mortgage lender said yesterday it still intends to pay shareholders a 30 per cent dividend hike.

The company is set to honour the 14.2p a share dividend announced on July 25 for all investors on the share register by the end of Friday.