Northern Rock could delay repayment of its remaining £11.5bn in taxpayer loans under a new Treasury plan to shore up the housing market.
Alistair Darling is discussing with officials a plan to ask Brussels for clearance to alter the terms of the state-aid package awarded to Northern Rock.
Under the current deal Northern Rock has promised to pay back the taxpayer by 2010. To raise the cash, the bank has been encouraging its customers to remortgage with other banks.
Although this strategy has allowed the bank to repay more than half of its loans already, remortgaging by Northern Rock customers has soaked up much of the lending capacity made available to the market by other banks.