Mumbai: Lloyds TSB Group Plc, the UK's fourth-biggest mortgage lender, has agreed to take over home loans from Northern Rock Plc, to increase its share in the country's shrinking mortgage market.

Under the agreement, the bank will assume a "substantial" proportion of Northern Rock's 180,000 fixed-rate mortgages, about 25 per cent of its total loans, Lloyds said in a statement. 

The deal will help the nationalised Northern Rock to trim its loan book and repay the 24 billion pounds ($47 billion) it borrowed from the Bank of England.

Newcastle, England-based Northern Rock will also receive a commission from Lloyds for each customer who switches to it.

Customers will, however, have the option to go for Northern Rock's standard variable rate (SVR) or switch to another provider.

Lloyds will sent letters and brochures to select customers and will wave the standard application fee.

Several banks, including HSBC, have been trying to lure away Northern Rock's customers after the financial crisis forced it to charge a higher than average rate for its SVR mortgages.

Northern Rock has also been been writing to its customers, and in some cases contacting them by telephone, to warn them that it is unlikely to offer them a good deal when their current package expires.

However, customers had to put down a minimum 20 per cent deposit and pay a fee.

The deal between Lloyds TSB and the Northern Rock will last for three years.

Northern Rock was nationalised in February and has since said it will cut about 2,000 jobs by 2011 and reduce its residential mortgage lending by half.

The European Commission, which is currently investigating the legality of the bail-out of Northern Rock, has invited public views on it.

Meanwhile, the number of new home loans hit a new low of 58,000 in April, according to figures given by the Bank of England. This is the lowest since the Bank began reporting the figures in 1993.