MPs were warned yesterday that Northern Rock could take even longer than planned to repay its £24.1bn debt to the government if the UK is hit by a recession or a housing slump.

The Newcastle bank, which was nationalised in February, is intending to repay its entire loan from the Bank of England by 2010 and to relinquish its government guarantees by 2011.

Northern Rock’s finance director, Ann Godbehere, signaled that the bank’s business plan could be thrown off track if the UK suffered an economic recession or a 1992-style housing crash.

Speaking to MPs at the Treasury select committee she said, “There could be a six-month delay in that scenario”.

The banks executive chairman Rob Sandler told the committee that Northern Rock’s business plan was “not without risk . . . it is a challenging plan in these respects”, before adding that the plan could come under pressure if house prices fell by 5 percent or more.

He went on to say, much would depend on the UK economic outlook, “If we suffer a downturn and this leads to higher levels of unemployment than at present . . . at that point this would place consider-able strain on the ability of the company to deliver the plan.”

Adding: “We have stress-tested the plan against a number of scenarios, including a decline in the housing market comparable to that of the 1990s, and the plan is robust [in] that scenario.”

The bank will review its current business plan in during the third quarter of this year.

MPs asked Mr Sandler whether he believed Northern Rock’s brand was broken to which he replied: “I don’t believe so . . . the results of the exercises [carried out] indicated that the brand whilst damaged is not damaged irreparably.”

He explained to MPs that Northern Rock was trying to shrink its mortgage book by almost half by encouraging customers to re-mortgage elsewhere when their loans end. The business plan was based on 60 percent of customers re-mortgaging away from the bank, but he acknowledged that fewer mortgage lenders were actively seeing new business in the current market, so the actual level of redemptions could be less.

“It becomes more challenging if there are more lenders out there who are not prepared to offer products to borrowers,” he said.

But Mr Sandler acknowledged there was a risk that Northern Rock would be left with riskier customers unable to re-mortgage elsewhere.

He told MPs he planned to keep sponsorships, such as Newcastle United and Newcastle Falcons.