Tory concerns over plans for bank

The Tory leader insisted it "would not be right" for the taxpayer to take charge of the troubled bank and become responsible for billions of pounds in mortgages.

Mr Cameron also said he would be urging other lenders to work together and soften the blow for customers at risk of becoming fresh victims of the credit crunch fallout.

"I don't support nationalisation (of Northern Rock)," he told the BBC Radio 4 Today programme. "I don't think it would be right for Government to spend even more taxpayers' money nationalising a bank and suddenly becoming responsible for £100 billion of mortgage lending.

"What we want is a private sale, but I suspect that the Government is running out of time and running out of money and it may well be that they need to go down the path of nationalisation. If it does it will be a monumental failure."

However, Lib Dem acting leader Vince Cable insisted that bringing Northern Rock under state ownership was now the "least worst" option, and could save the public purse billions.

"We are facing in practice two pretty unpalatable alternatives, which is letting Northern Rock go into administration, which would mean that the taxpayer would lose a lot of money, the company would be wiped out, including most of its jobs. The Government would have to stump up a deposit guarantee," he told Today. "The alternative, which isn't attractive, I stress, but is the least worst option, is to take the thing into public ownership. I have written to the Prime Minister about this and time is of the essence."

Mr Cameron said the repercussions of the crisis sparked by bad debt in the US were being felt increasingly widely, and 1.4 million people due to come off fixed-rate mortgages this year would be paying on average £200 more every month.

He said he would be telling a meeting of the Society of Mortgage Lenders later to help borrowers cope with the new situation.

"That could be staggering the increase in mortgage payments when they come in, it may mean switching some customers to interest-only mortgages," he said. "What I will be saying to them is that they must work together and make sure that they adopt best practice."