Northern Rock received a double boost today to its chances of survival as the Treasury imposed an unlimited guarantee on all new retail deposits and the Bank of England paved the way for a £10 billion loan from US financial services giant Citigroup.

Shares in Northern Rock surged more than 17 per cent, breaching the 200p threshold, as Northern Rock provided the basic details of its desparately needed financial breathing space — and a complete volte face by the Treasury.

It means that the embattled Tyneside mortgage bank, still trying to negotiate a possible sale with four potential buyers, can press ahead with sale talks against the backdrop of more-stable funding and the possibility that it can rebuild as an independent business.

But the Rock was also forced to admit that it had racked up £40 million to £50 million in costs since it went into financial meltdown, including on advisory fees.

Northern Rock is being advised by bankers at Merrill Lynch and Citigroup.

The Treasury's guarantee for retail depositors covers all new savings since September 19, including interest payments and funds moved between accounts.

It should help to encourage customers to open new accounts but represents a complete climbdown by the Government department, which previously set limits on the guarantee for new joiners.

"Accordingly, all retail savings — for both existing and new depositors — remain guaranteed, safe and secure," Northern Rock said.

It is understood that funds previously borrowed from the Bank of England had been secured on Northern Rock's mortgage book.

However, after discussions, the Bank has agreed to lend funds secured against other of its assets as well.

This leaves Northern Rock free to borrow from Citigroup, which will want to have the bank's mortgage book as collateral.

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