Northern Rock plans to completely repay all the money it owes the Bank of England within three years, even if house prices fall.

Ron Sandler, executive chairman of the bank that was taken into public ownership in February, outlined the lender's plans yesterday to the Treasury Select Committee.

Mr Sandler told the committee that the Rock aims to repay at least 25 per cent of the £27 billion loan by the end of this year, a further 50 per cent by the end of 2009 and the rest in 2010.

He said that the bank would return to private ownership during 2011 as a leaner bank “capable of standing on its own two feet”.

Ann Godbehere, the chief financial officer, told MPs that the bank had stress-tested its business model against a fall of 10 per cent in house prices.

She said that if that happened, the loan would be repaid with only a six-month delay.

The North East-based lender also intends to maintain its sponsorship of Newcastle United Football Club and the Newcastle Falcons rugby union team.

The total value of the deals is unknown, but the Newcastle United sponsorship costs £25 million over five years and was signed in 2005.

Northern Rock will also continue its payments of £15 million annually to the Northern Rock Foundation, which supports projects in the North East and Cumbria.

Mr Sandler said: “We have chosen to continue the sponsorship of Newcastle United and Newcastle Falcons, partly because of commitments we have entered into there and partly because I believe it is in the commercial interest of the bank.”

He is negotiating with unions over an expected 2,000 job cuts at Northern Rock - representing about a third of its staff - which will be announced by the end of the year.

Northern Rock is planning to increase its redemption rate - the number of people who move their mortgages elsewhere - to 60 per cent, compared with 40 per cent last year. It hopes that this will leave it with a leaner, better-quality mortgage book.

Mr Sandler declined to comment on how the nationalised bank would become a private company again in 2011.

The main options are selling it to another company or floating it on the stock exchange.

He said that he plans to relinquish an executive role once the bank has stabilised, but would remain as a non-executive chairman “for as long as it makes sense to be there”.

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