What happens if my bank goes bankrupt?

[FinancialCrashLearning]

Hi all, this might be a stupid question but I am in my mid 20s and trying to understand mortgages.

Say I get a mortgage for a house and it's approved and I start paying it and all is well, but then suddenly there's some economical issue in the country or world like the 2008 financial crash and the bank who lent me the money goes bankrupt and out of business.... what happens to my mortgage, my house and me?

Genuine question and would love to know.

Thanks!

You'll owe the money to someone else.

The govt will step in and prevent a UK bank from going under, either by injecting cash in return for shares, or by arranging a sale to another institution.

Then your mortgage will carry on with that new legal entity.

Either;

1 the government will bail out the bank and it all stays the same for you or

2 your mortgage will be bought by another bank and everything stays the same for you except the name of the bank you are paying back.

Former Northern Rock customers were given a very bad deal after their mortgages were sold

https://www.ftadviser.com/mortgages/2023/01/17/more-northern-rock-mortgage-prisoners-could-join-claim/

It's not a stupid question at all. It's a very sensible question.

Mortgage prisoners:

https://www.moneysavingexpert.com/mortgages/mortgage-prisoners/

Banks failing:

https://news.sky.com/story/government-stake-in-natwest-now-under-30-13101666#:~:text=NatWest%20received%20several%20multibillion%2Dpound,then%20known%20as%20RBS%20Group.

There are far more safeguards now, and it's very unlikely to happen.

We had a mortgage with Northern Rock when it went under. It was just transferred to Virgin, and everything stayed the same. We had a letter from Virgin to say we owed the money to them now, and that was it. It didn't really affect us at all.

I had my first mortgage with Northern Rock and the government stepped in. My mortgage rate was still the same as it transferred over. I don't think I had a good deal out of it but my home was secure. Like you I was worried that my home was at risk but the government couldn't just tip thousands out of their homes.

We had a northern rock mortgage, I understand the mortgages were sold to different companies. For us it didn't make any real difference, but if we had wanted to change the term or overpay I don't think it would have been possible.