BoE bails out key mortgage lender

LONDON, England -- The Bank of England has taken the unusual move of bailing out a key mortgage lender, as the global credit crunch threatened to claim its latest victim, sending European markets reeling.

Shares in Northern Rock, the UK's fifth biggest mortgage lender, dropped more than 20 percent in early trading after it announced that its 2007 profits would be more than £100 million ($200 million) lower than expected.

British finance minister Alistair Darling gave the go-ahead for the move, saying the Bank of England was prepared to act as lender of last resort.

Chief executive Adam Applegarth said the Bank of England's support "reflected a recognition that Northern Rock is solvent," the British Press Association said.

The Newcastle-based group is expected to release profits of between £500 and £540 million, considerably lower than the £647 million expected by the market, PA said.

The company is heavily dependent on money markets to raise cash for lending, making it vulnerable to the sharp hike in borrowing costs during the recent turmoil as a result of the U.S. sub-prime mortgage crisis. E-mail to a friend