Northern Rock said it would encourage borrowers to remortgage with rival lenders when their deals come up for renewal under plans to shrink its mortgage book by more than half.
Ron Sandler, executive chairman of the now-nationalised bank, said he expected between £25 billion and £30 billion of mortgages to come up for renewal or shift on to a higher rate this year.
The newly-appointed boss hopes that 60% of borrowers affected will move their mortgages elsewhere, helping the bank achieve its goal of cutting the mortgage book from £107 billion to £50 billion by 2011.
Mr Sandler pledged to pay back the £24 billion of outstanding debts to the Bank of England by the end of 2010 as he fleshed out plans for the future of Northern Rock. But he painted a difficult picture for the bank over the next few years, warning of "significant losses" in 2008 and that it will be another three years before the bank breaks even.
Northern Rock will seek to boost its retail deposit base as part of aims to trim reliance on wholesale money markets from 75% to 50% over the next four years. However, the lender will work within tight rules to avoid competition concerns, given its Government ownership.
Northern Rock promises not to take more than 1.5% of all UK retail deposits in the UK and no more than 2.5% of gross new mortgages - a far cry from its pre-crisis levels of 1.9% and 7.5% respectively. It has also committed not to appear in the top three rankings of "best buy" tables for the rest of 2008.
"We are determined to ensure that we will not take unfair advantage of Government support," the bank insisted.
Mr Sandler has already warned that it will have to axe around a third of the company's 6,000 jobs to slim down the company in initial plans outlined earlier this month. But he confirmed that the bank's 78-strong branch network would not be reduced, with the branches seen as being key to its aims to boost saving deposits.
And while the mortgage book will be significantly cut back, it will still aim to write around £5 billion a year in gross new lending to "maintain its place in the market"