Northern Rock??

[hex]

We've got a mortgage with NR with a cash draw down facility...should we be worried? Is what's going on likely to affect mortgages?

The UK's fifth largest bank has had to be bailed out by the bank of England, this is the first time this has happened since the 1970s. The media had to report it. They perhaps should have tried harder to reassure people but they had to report it, the public do have a right to know when the Bank of England uses their money to bail out a corporate entity in this way.

It was surely Northern Rock's own risk taking that meant they needed to turn to the Bank of England or go under. They will most likely be taken over by another bank in the next few days and then this will calm down. But the effects of this will be felt for a long time.

here is a link to WORKING LUNCH with loads of details about NR

If i was Northern Rock I would be serving the bbc with a writ for damages. The point is that the Bank of England has issued them with an emergency credit facility (just like us having an overdraft) which they have not even had to make use of yet....

As usual the media is only in possession of about 60% of the facts, but hypes everything up beyond belief and sparks a run on the bank.....

great!

I'm still not panicing - reckon that if they look like being in serious trouble Lloyds will step in and buy them.....overseas banks are also apparently interested.

Northern Rock has had a problem because of the way it funds its loans...most banks borrow from you (i.e. you save with them and they pay you say 5%), they then make loans out for motgages and charge say 6% - i.e. they make 1%.

Northern Rock does not have alot of deposits - it funds itself by borrowing in the wholesale market. Most banks are mainly funded by the people that save with them - NRock is fairly unique in this respect. That means it borrows from other banks. Because of the credit crunch that has become alot more expensive recently and as such they are now having to borrow at a higher rate than they were paying you. It doesn;t mean they are bust....that only happens if you all default on your loans and/or the value of your property falls dramatically...if that happens we are all stuffed!

this is a market problem - the credit markets, i.e. where the banks borrow money and lend to each otgher have become very risk averse in recent weeks because of what is going on in the US subprime area and as such they want a greater return for the risk they are taking.

as UPwind said - ultimately if they have a real long term problem they will get bought by someone else

I don't understand this game of shoot the messenger with blaming the bbc for the queues outside Northern Rock branches today. The bank took risks by relying on short term borrowing on the money markets. It was a gamble that payed off for years and now that it has gone wrong they seem to have been given access to unlimited funds from the Bank of England.

This is huge news and is relevant to us all.

The story only broke last night and missed most of the first editions so the way the queues formed was from radio and tv bulletins last night and this morning. Agree with hecciesmum's post, it is fundamentally a problem with the US market.

We have a significant sum of money in a NR fixed rate bond. This interesting info from BBC site has put my mind at ease.

Are savings at risk?

Anyone with money in a savings account with the Northern Rock - or indeed any other bank - needs to realise that some of their money is always at risk, if they are saving more than £2,000.

Banks are covered by the Financial Services Compensation Scheme.

If you have up to £35,000 on deposit then you would, in the event of insolvency, get back all of the first £2,000 in your account and 90% of the next £33,000.

That would be a total of £31,700 per person in compensation, or to look at it another way, a loss of £3,300.

But any money above the £35,000 threshold might be lost altogether.

No wonder old ladies keep their cash in a mattress!

Gobbledigook - I once sobbed watching Crimewatch because an old lady had £40k taken from her house - her life savings. Some horrible little toerag is living off of her earnings.

As Roisin has pointed out, in any event, savings up to £35k you are protected. If you have more than that you would probably not be keeping it in just one bank account unless you were very rich indeed.

There has been a run on the bank today but Northern Rock have been backed by the Bank of England and will likely be bought out now that their share price has dived.

As Roisin has pointed out, in any event, savings up to £35k you are protected. If you have more than that you would probably not be keeping it in just one bank account unless you were very rich indeed.

There has been a run on the bank today but Northern Rock have been backed by the Bank of England and will likely be bought out now that their share price has dived.

Anyone seen It's a Wonderful Life?

A run on the bank. Who would have thought.

What a bunch of silly investment bankers!

The idea that NR is an innocent victim of troubles elsewhere is not very convincing IMO. They have been doling out mortgages of well over 100% among other things. That is not responsible lending:

www.ft.com/cms/s/0/aa875c98-62ed-11dc-b3ad-0000779fd2ac.html

but southutshire that lending strategy isn't what has caused the current problems . I've yet to see anything to suggest that they have a worse bad debt record than other lenders. The current issue is one of liquidity , a short term lack of investment from the traditional money markets , not solvency.

Did you see the article I linked to, though? NR was not picked at random - it has made itself more vulnerable than other banks to the liquidity problems.

Yes it is more vulnerable in that respect because of the gap between investment income and lending, not specifically the type of lending though.

Hey layman, I thought that. They should employ Jimmy Stewart impersonators to make impassioned pleas to the customers.

If I worked for NR I would be furious with the way this has been reported. My family (I was on hols with parents, siblings, DH & DD when it broke on the news) immediately started panicking on my behalf "Go and draw your money out right away Em" but COME ON!

I work in finance so I have a level head when it comes to this sort of stuff.

The people queuing to take their money out remind me of those who go and stock up on water from Tesco when they have heard there is a hosepipe ban.

ELF - dh also said that it was like the media reporting severe weather and everyone rushes out to bulk buy bread, milk and water.

Did anyone see the picture in The Daily Mail of the queues outside Bromley Branch? That's my local branch. The queue started at 5pm this morning.

Someone told me that there was a gentleman from Lloyds walking their queue inviting their customers over once they had received their cheques. nm,hwrwaherhwkh

And the local Barclays bank wasn't accepting NR cheques.

We remortgaged with them only last week I think we may have tipped them over the edge.....

Any bank can be in this situation given the current climate.

I was explaining to BIL that my money was protected, and the only time you need to fuss about money in the bank is if there is a collapse of currency / Great depression, and then we're all screwed.

Besides, my couple-of-hundred-pounds of savings, makes no odds against my 90k mortgage!!

If a larger bank bought out Northern Rock, they would not have to IIRC honour existing mortgage fixed rates & terms. There is no likelyhood of the new owner demanding all of it immediately. You could have to renegotiate your terms with the new owner.

We are in the process of selling our house (or would be if we could get a committed buyer) so mortgage wise I'm not too fussed as we were planning on going to Halifax / HSBC for interest only repayments for a year or so.

"the local Barclays bank wasn't accepting NR cheques"

That is extraordinary news.