In order to preserve Northern Rock credit rating, Treasury announced on Tuesday that it was extending the guarantee it had given to creditors.

Northern Rock’s share price rose 3.4 per cent in response to the move, which will extend the guarantee to a number of its uncollateralised obligations.

The Treasury said that the government guarantee would now also cover uncollateralised and unsubordinated wholesale deposits; all Northern Rock’s payment obligations under any uncollateralised derivative transactions, such as swaps; any payments due on collateralised obligations which exceed the available collateral; and Northern Rock’s obligations to repurchase mortgages which it has securitised through its Granite vehicle.