The largest former shareholder in Northern Rock, SRM Global, has lambasted the Government for injecting an additional £3 billion loan into the stricken mortgage lender, describing the move as "headline-grabbing nonsense".

In a rare interview, Jon Wood, the hedge fund's founder, also argued that nationalising the bank has sharply driven up mortgage costs for millions of embattled homeowners.

He repeated SRM's argument that a private sector buyer should have been found for the Tyneside lender and urged the Government to refloat Northern Rock.

It should be allowed to borrow from the Bank of England on the same terms as any other financial institution, he said, arguing that Northern Rock had one of the highest quality loan books in the country.

"They are trying to make the bank look distressed when it isn't. They do not need to do this," Mr Wood told The Times.

"Killing off Northern Rock the way they have severely damaged the British mortgage market to the detriment of millions of people. It's not the exposure of the taxpayer to Northern Rock that should be the concern, it's the worry of the extra cost of mortgages due to inept action by the Bank of England and the Government," he said.

Northern Rock was taken into public ownership in February after seeking up to £25 billion in emergency funds from the Bank of England when it was denied access to the wholesale markets.

SRM, which had amassed a stake of more than 10 per cent, is one of several investors suing the Government for compensation.

The Government, which has already underwritten roughly £100 billion of Rock liabilities, offered the new funds earlier this week through a debt-for-equity swap to be carried out between the Bank of England and the Rock.

At the same time, the bank unveiled steeper than expected first-half losses of £585 million.

But Mr Wood said: “We note that Northern Rock is 50 per cent ahead of schedule in paying the Government back, an unnecessary pressure, especially when the Government is making £100 billion of loans available at a substantially cheaper rate under the Special Lending Facility to Northern Rock's competitors.

“Excluding the exceptional and unnecessary losses such as advisers fees and redundancies caused by the government, Northern Rock made a loss of £176 million, which is after penal interest of over £200 million pounds paid to the Government. That confirms our stance all along that this is a solvent and profitable bank”

Mr Wood said that Northern Rock has among the highest quality loan books in the UK, “despite the damage caused to it by the Government unnecessarily forcing struggling borrowers onto penal rates and out of their houses”.

He insisted: "What the Government should do is what we have been saying all along - allow Northern Rock to access the Bank of England acting as Lender of Last Resort or the newly named equivalent Special Lending Facility like any other bank and continue as a profitable business unencumbered by the Government. The Government has no need to let the European Commission interfere," he said

The Treasury said the Rock needed the money. A spokesman referred to comments by Alistair Darling, the Chancellor, earlier this week.

Mr Darling told the BBC's Today programme: "Northern Rock needs more share capital. It doesn't have shareholders now that it's in... it's owned by the Government. So it's got to come to us.

"So what we've said is that we will put in up to £3bn. We've got to get state aid approval for that, so we can't give a precise figure, but up to £3 billion may be necessary," he added.

The Government has argued that nationalising the bank was a preferable alternative to allowing it to fail.

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