Beleaguered Northern Rock suffered further share price misery today, sending stocks across the mortgage sector spiralling into the red.

Shares in the mortgage bank plummeted by another 35 per cent as the sell-off sparked last Friday continued and customer queues outside branches showed no sign of ending.

Northern’s share price troubles spilled over into the wider market, with the FTSE 100 Index down 106.5 points at 6182.8.

Fellow mortgage lender Alliance & Leicester which also has a funding gap between its deposits and the amount of its mortgage loans, also suffered, falling 31 per cent, or 273p to 600p.

Northern Rock ended the session down 155.25p at 282.75p, extending Friday’s 31 per cent dive, meaning it has now lost £1.5 billion in value since it agreed emergency funding facilities from the Bank of England on Friday.

Northern Rock suffered as hikes in the interbank lending rate hit profits at the group, which is heavily reliant on such funding due to its relatively small deposit rate.

The developments also sent tremors through the financial and housing sectors.

A stock downgrade from by Merrill Lynch and Citigroup added to the heat on the banking sector, not helping Alliance & Leicester’s share price despair, while Halifax Bank of Scotland declined 5 per cent, or 47p to 813p.

Concerns over future profitability for banks also saw Lloyds TSB down 7p at 513p, HSBC off 6p at 882p and Royal Bank of Scotland down 23p at 508.5p.

The shockwaves also put housebuilders under pressure amid fears that the property market is heading for a slowdown. Barratt Developments slid 60.5p to 769p while Persimmon was off 70p at 946p.

Retailers took a hit, with Homebase owner Home Retail Group 23p lower at 376.5p and B&Q owner Kingfisher falling 11.2p to 185.4p amid implications for the home improvement market.

Meanwhile, pubs stocks were lower after Dresdner Kleinwort lowered its price target on All Bar One owner Mitchells & Butlers.

The chain said its liabilities from a shelved property deal more than doubled to £140 million, although Mitchells said this would not hit profits in the current year.

The group’s shares were 29.5p lower at 589.5p, dragging a number of pub stocks lower. Enterprise Inns dipped 46p to 578p while Punch Taverns eased 62p to 972p.

On a more positive note computer software firm Sage was one of less than a dozen FTSE risers, up 6.75p at 250p, after a broker upgrade, citing the group as being a possible takeover target.

In the FTSE 250 Index, Bradford & Bingley was down 15 ore cent, or 50.75p at 279p and specialist mortgage lender Paragon fell for a second successive session, down 12.25p at 285.75p.

Explore Markets

• United States

• Europe

• Japan

• China

• Russia

• The Gulf

• India

• Africa

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts