The number of house purchases financed by mortgages fell by half last year, in part because of a collapse in the availability of mortgages.
The Treasury had a role in causing this trauma - which made it particularly difficult for young people to buy homes - because of its insistence that Northern Rock repay £27bn it had borrowed from us, the taxpayers.
Some £18bn was repaid last year - a rare bit of good news for the public finances that is seen by some as a disaster for the wider economy.
But the Rock has now been told that it doesn't have to repay the rest, for now at least.
And the government will provide around £10bn of new taxpayer loans to the Rock so that it can start providing new mortgages.
In total, the Treasury's decision to revitalise this nationalised bank will mean that there should be £28bn of additional finance for mortgages in the UK over the next year or so compared with 2008.
That's equivalent to more than 10% of all gross mortgage lending last year - making this arguably the government's most significant attempt to prop up the housing market.
So the big question is whether there's actually an appetite for mortgages, whether the problem right now is a shortage of loans or a collapse of confidence by possible buyers and a lack of demand.
My understanding is that the Rock will endeavour to exploit what demand there may be, by offering mortgages that may be more suitable for first-time buyers than much of what's on offer from the big banks.
I'm told it will offer mortgages worth 80% or 90% of the value of properties, compared to the 75% loans that are now the industry norm.
That may not represent a return to the Rock's extreme bull-market ways of offering 100% mortgages - the kind of behaviour which the prime minister yesterday suggested should perhaps be outlawed.
But a 90% mortgage is not exactly risk free, at a time when house prices are still falling.
What's also significant about the Treasury's announcement is that it can be seen as confirmation of the government's intent to revitalise the Rock and - in time - return it to the private sector.
However there's a signal that Northern Rock's stock of existing mortgages contains too many toxic loans for them to be left inside a bank that wants to thrive again: so the book of older mortgages is being hived off to be managed separately from the new improved Rock that will provide new loans.
Is it realistic to expect a serious Rock revival?
If the defiant pride it generates in its home in the North East is anything to go by, Northern Rock can prosper.
On my recent visit there, I was struck by the burning desire of almost everyone I met to see the bank reborn as a prudent bank for a new financially conservative age, rather than the shamed victim of the credit bubble that turned to crunch.