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Despite the pun, Simon Chalk, mortgage and equity release planner for Mortgage Portfolio, believes that Northern Rock is stuck between a rock and a hard place.

Since nationalisation in February this year, the troubled bank has cut 1500 jobs, scaled back its lending and shrunk its £84bn mortgage book to help repay the government. In the nine months to September 30, it has repaid £15.4bn of the £26bn it owes.

Mr Chalk asked: "What can be done to alleviate the problem for this lender? Although it is not a storm in a tea cup, surely some fault must lie with those borrowers who were either ill advised or the mortgage advisers too."

However, the bank which offered 'riskier' lending before nationalisation - including 125 per cent loans - has seen its mortgage arrears figures jump by nearly 60 per cent in the past three months.

At the end of September, arrears over three months were 1.87 per cent compared with 1.18 per cent at the end of June.

Arrears on the Together loans - a mortgage plus an unsecured loan - have jumped faster than conventional arrears and accounted for three-quarters of home possessions in the period.

As a result, the reduction in the size of Northern Rock's total mortgage book has contributed to an increase in the proportion of the book in arrears.

At the end of September 2008, residential arrears over three months were 1.87 per cent, compared with 1.18 per cent at the end of June 2008.

A spokesman for Northern Rock said: "Northern Rock is continuing to strengthen its debt management capabilities, including recruitment of new management and staff, redesign of core strategies and investment in new systems.

"Notwithstanding these actions, the trends outlined above are anticipated to continue, resulting in further expected increases in the company's loan-loss provisions."

Northern Rock also saw the number of homes in possession increase by 500 to 4201 at the end of September.

In addition, it said it had taken steps to resume new wholesale funding, reflecting market conditions and raised £927m of wholesale funds in short term notes, but not through securitisation.

Mortgage lending has remained low and gross residential mortgage lending in the first nine months was £2.4bn compared with £1.9bn in the six months to June 30.

A spokesman added that one of its priorities was to build a standalone funding position, which includes achieving a more balanced mix of retail and non-retail funding, bringing the retail funding proportion to around 50 per cent of the funding base.

She said: "It is important to retain a diversified funding platform, however, which is why we will look to raise funds from the wholesale market. This is on a very modest scale, however, reflecting our desire to achieve a more appropriate balance between retail and non-retail funding.

"I can confirm that in July 2008, Northern Rock resumed new wholesale funding albeit on a modest scale, reflecting market conditions and the company's intention to achieve a more balanced mix of retail and non-retail funding, as announced in our business plan. Since the resumption, £927m of new wholesale funds have been raised."

Mr Chalk believes that the path of wholesale funding is one that should be considered.

He said: "They cannot rely on retail funding and the money has to come from somewhere.

"In time it will change, but it will be a long time before the market gets back to competitiveness and innovative products. At the moment it is all about the duplication and replication of the same products."

While Melanie Bien, director for Savills Private Finance, believes that the problem lies in the focus on margin rather than market share, which is all wrong.

She said: "Criteria seem tougher than ever. We have seen in the last couple of days people cannot switch to other lenders.

"Even though interest rates are coming down, the focus has been harder and there has been a reduction in choice. That is bad news for the consumer.

“Ultimately, the government wants lending to be at 2007 levels, but to do this could mean lenders like Abbey and HSBC will be more competitive, as they are quite aggressive in building market share.

"The problem we have is that they are after margin, rather than market share. Lenders do need to lend. But the government will only nationalise others if absolutely necessary.

"For shareholders, the whole economy depends on the strength of the banking sector."

Ms Bien added: "However, it is not all doom and gloom and it's not necessarily a bad thing for the tax payer, as Northern Rock will get back on their feet.

"It is about restoring confidence and encouraging lenders to start lending to each other and then the banks will be brought in on an even keel.

"In the securitisation market, if lenders had been restricted, the market would have never have grown this much. At the time, it answered the need of the market and its demand.

"For the lenders that are doing well, like Abbey and HSBC, they do not have to go into the money markets. But some people might argue that there is more security there."

She stressed: "Until confidence is restored, it is just a matter of sitting it out. It is a tough market for borrowers at the moment and they need to draw a line. There is no appetite for lending and there are not the right circumstances to introduce new products and deals, especially for first-time buyers."

Ray Boulger, senior technical manager for John Charcol, believes that the fact that Northern Rock has got a large repossessions record should not surprise anybody.

He said: "The situation we are in now determines the current consequences.

"What people overlook is the high risk was reflected in the high price for mortgages and this is one of the biggest differences, where as last time we had a serious downturn in the 1980s and 1990s.

"What will tend to happen is that with people who have equity, once the lender satisfies themselves that they can afford it and pay what they can, rather than repossess, most lenders would allow that the debt increases, so people stay in their homes."

Mr Boulger did emphasise that until the market recovers, only then can things can get back on track - for everybody, not just Northern Rock.

He said: "If situation is recoverable, we will see if it is a temporary problem. If the situation is not recoverable and the mortgage market will increase negative equity, lenders will have much less room to manoeuvre."

In taking the weight off its shoulders - in paying the government back - Mr Boulger believes that the reason why lenders are not offering existing customers introduction deals, is if they do, they will take longer to repay the bank loan.

He continued: "The amount of lending has been dictated by the amount of funds they have.

"In its 'aggressive' approach, pushing its customers is not its best option. But in offering extremely competitive rates for new customers, is to balance out its mortgage book and make it a low-risk business."

But, being stuck in between a Northern Rock and a hard place will not be forever.

He concluded: "The mortgage market will come back but in a different way. In 10-15 years time we will get back to strength. In the blame that has been apportioned, the banks are certainly getting their comeuppance now."