Mortgage lenders today gave a cautious welcome to moves by the Government to allow nationalised bank Northern Rock to bolster its presence on the mortgage market.

As part of the Government's aim of freeing up the housing market, Chancellor Alistair Darling today announced the state-owned lender would slow its rate of mortgage redemptions, when customers are encouraged to find new lenders when their fixed-rate deals come to an end.

When Northern Rock was bailed out in February 2008, 60% of its customers were encouraged to find new mortgage providers when their fixed-rate deals came to an end. The bank employed brokers with the aim of encouraging borrowers to find another provider. The move was part of a package designed to generate cash for Northern Rock to repay its state loan. Now that target has dropped to 30% to "support Government policy to increase mortgage lending capacity in the market", the bank reported.

The change affects only current customers, and the reduced level of redemptions will lead to Northern Rock repaying its loan to Government at a slower rate.

It has not announced whether it will offer more competitive rates for either current or new customers. But industry experts are cautiously hopeful the move will kick-start the frozen housing market. "Part of the problem we've seen with lending on the housing market is that with other lenders trying to absorb Northern Rock's mortgages, they've been less interested in offering new deals to other customers, so this move should have a positive impact on the market," said Sue Anderson, of the Council of Mortgage Lenders.

House-sellers praised the move but said that other lenders need to do more to encourage new buyers.

"This is a helpful step in the right direction, but we need to see other lenders jumping on the bandwagon and increasing their rates of lending too," said Melanie Black, manager of residential sales at east London agent Strettons.