Fears of a housing crash are threatening to scupper the sale of Northern Rock, pushing the stricken mortgage lender ever closer to nationalisation, as shareholders seek to keep the company intact. Sunday Telegraph, The Times

Any rescue will depend on the £10bn-£15bn of funding that investment banks Citigroup, Deutsche Bank and Royal Bank of Scotland have offered to inject, but they are said to be growing increasingly reluctant to secure their loans against Northern Rock’s assets.

Separately, Goldman Sachs – which is advising the Government – is still pressing ahead with its own efforts to find an alternative funding syndicate.

Although the bulk of Northern Rock’s mortgages are good, the Treasury is insisting the banks take as collateral a slice of the entire book – including lower quality mortgages. As a result, they are having to revalue Northern Rock’s assets to reflect the prospect of declining property prices and rising levels of arrears.

One banker close to proceedings said: 'The deterioration in the housing market does make it harder [to sign off on funding]. There has been a significant worsening in the outlook for UK housing since September [when the crisis erupted].'

RAB Capital, one of the biggest investors in Northern Rock, has written to shareholders in the troubled bank ahead of an extraordinary meeting on January 15 urging them to back resolutions tabled by it and its fellow hedge fund SRM Global.

Richards said that the Northern Rock board should not be allowed to complete any material corporate activity' without the backing of a simple majority of shareholders and that he hoped to win the support of the bank’s 140,000 private investors.