View Full Version : Northern Rock
How many other banks are in the same trouble? Barclays had to borrow from the BOE a few weeks back, and now NR. Amazing to see a bank run here in the UK. The doom mongers are saying it'll be like 1929 :eek:
Goodbye easy credit and hello recession. The problem with boom times is that whilst we have growth in jobs and and wealth, we also have very poor business riding on the wave of growth. Recessions are good for weeding out the crap so the next cycle of growth can start afresh.
Northern Rocks main business was selling mortgages at ridiculous LTV. Economic 'experts' and the Govt keep saying there is no sub prime problem here in the UK. NR built its core business selling to the sub prime market. Then again, who really believes the Govt anyway?!
Is it time to bolt down the hatches? If this worsens its going to affect everyone, especially those that have speculated in the property market. We had the BOE leave interest rates where they were last week, and yet mortgage payments are set to increase because of the LIBOR rate (the rate at which banks lend to each other).
As NR was one of the main lenders (1 in 5 mortgages are with them) people are going to get a nasty shock when their fixed terms end. Other banks will be less willing to lend - it can get very nasty very quickly.
Will be interesting to see how the blame game plays out. The Govt is responsible for not tackling the cheap credit problem, the banks for irresponsible lending and those that used the cheap credit to speculate heavily.
At least we won't have to hear the "my house has gone up by x" for a while and an end to the property porn on the telly.
pookie1968uk
16-09-2007, 12:54
all a bit scary really. we have a fixed rate mortgage with NR but we have about 4 years left on it at a good rate of interest. but yes it is worrying what will happen after that. we normally go for another deal or look around other lenders for a deal but what if there are no one willing to do that?
Pookie, I think when your mortgage term ends in four years you shouldn't be faced with this problem. NR will either have been subjected to a take-over or will have recovered itself by then. The economy will either be recovering or booming which is generally good for everybody.
Everybody who has just withdrawn the £2billion over the weekend is foolish and has just made it even more likely that NR will be taken over.
If people stopped to think for a minute they would realise that the chance of them losing their money is very, very small. The Bank of England have stepped in with an emergency loan, giving NR time to sort itself out financially and keep it's customers money safe. The BoE and the Government have guaranteed Northern Rock's future and it's actually the right time to open up a saving account with them. Their interest rate is one of the highest around and you can be sure that BoE will not walk away from NR at any point. NR will not go bust, it will be taken over by another bank/building society if it cannot survive. Imagine the catastrophe that would ensue if the BoE and the Government allowed the bank to go bust.
Variable rate mortgages will go up by about 0.5% (about £40 extra per month on every £100k you owe), whoever your lender is. The Bank of England are likely to cut the base rate in the near future though which is good news for those on a VR mortgage. If your mortgage term finishes before the end of the year you should start looking now for a good deal because we're in for another interest rate hike by all lenders.
So basically, if you're with Northern Rock, sit tight and keep you money where it is.
Pinkbanana
16-09-2007, 20:16
Everybody who has just withdrawn the £2billion over the weekend is foolish and has just made it even more likely that NR will be taken over.
So basically, if you're with Northern Rock, sit tight and keep you money where it is.
Foolish? I honestly dont blame people for withdrawing their money - lots of the people who I saw lining up to take their money out of Northern Rock, were older people. People from a generation who mistrust banks (who maybe as children grew up in the wake of what happened in 1929). One elderly fella interviewed said that he was too old to work for more money, so he wanted to move his money (retirement fund) out of NR, so that he had peace of mind. You cant blame someone for doing that.
I think people are entitled to do what they wish with their money, especially if its their life savings....and as more and more people take their money out, the more that would panic me, and I guess, I would probably end up doing the same (if I had any savings :( ).
Also a financial advisor on the TV said people should move their money, because they were lots of better interest rate deals available!
Everybody who has just withdrawn the £2billion over the weekend is foolish and has just made it even more likely that NR will be taken over.
If people stopped to think for a minute they would realise that the chance of them losing their money is very, very small. The Bank of England have stepped in with an emergency loan, giving NR time to sort itself out financially and keep it's customers money safe. The BoE and the Government have guaranteed Northern Rock's future and it's actually the right time to open up a saving account with them. Their interest rate is one of the highest around and you can be sure that BoE will not walk away from NR at any point. NR will not go bust, it will be taken over by another bank/building society if it cannot survive. Imagine the catastrophe that would ensue if the BoE and the Government allowed the bank to go bust.
Variable rate mortgages will go up by about 0.5% (about £40 extra per month on every £100k you owe), whoever your lender is. The Bank of England are likely to cut the base rate in the near future though which is good news for those on a VR mortgage. If your mortgage term finishes before the end of the year you should start looking now for a good deal because we're in for another interest rate hike by all lenders.
So basically, if you're with Northern Rock, sit tight and keep you money where it is.
I disagree entirely :)
The BOE is totally independent of the Govt, hence why Mervyn King (BOE Governor) has stated that the banks are on their own. They have no choice but to step in at the moment to ensure the liquidity flows to keep the whole system going. The £113 billion in assets is misleading. Here's an excellent blog by Robert Preston on the actual numbers (http://www.bbc.co.uk/blogs/thereporters/robertpeston/2007/09/rock_the_numbers.html). If there is a full on run on the bank, NR is in serious trouble. I agree that the likelihood is the NR will be taken over, and that it is a good time to buy some shares in NR but the new owners are unlikely to follow NRs business model.
As for the BOE base rate. Its pretty meaningless at the moment. The banks use LIBOR to trade in, as as we have seen, last weeks hold in IR still meant mortgage repayments going up. The housing market has always been volatile and this credit crunch isn't going to help. The easy flow of money is drying up, the banks will be more aggressive in chasing up defaulters, and the pinch will be felt by all.
The housing market is the biggest pyramid scam of them all. As with all pyramid scams the game is up when the people at the bottom dry up - in this case the first time buyers. What you get is people in the pyramid selling to one another until the last fool falls. NR is a symptom of the trouble in the pyramid.
Foolish? I honestly dont blame people for withdrawing their money - lots of the people who I saw lining up to take their money out of Northern Rock, were older people. People from a generation who mistrust banks (who maybe as children grew up in the wake of what happened in 1929). One elderly fella interviewed said that he was too old to work for more money, so he wanted to move his money (retirement fund) out of NR, so that he had peace of mind. You cant blame someone for doing that.
I think people are entitled to do what they wish with their money, especially if its their life savings....and as more and more people take their money out, the more that would panic me, and I guess, I would probably end up doing the same (if I had any savings :( ).
Also a financial advisor on the TV said people should move their money, because they were lots of better interest rate deals available!
Interesting point there. The majority of savers are the elderly. Why didn't we see many young people there queuing up? Probably because none have savings and are in debt by thousands!
My friends sister actually thought if NR go bust she doesn't have to pay her mortgage back - doh!
I am in the lucky situation that my mortgage is paid off.
I was worried though when I learned of the amounts savers would get back if their bank goes bust.
1. You get the first £2K in full
2. You get 90% of the next £33K
3. Anything else is gone!
Currently my savings are 80% with one bank - and I would be in a losing situation.
I am seriously thinking about spreading my savings about a bit.
And I wonder how long the process would be to claim the money back from the FSA. No doubt a long winded process that would leave many in financial hardship.
Looks like the run on the bank is continuing today.
There was an old guy on the news this morning - he had been queuing since 3.15 this morning outside the branch in Kingston-upon-Thames!
Some of these folks will have lost out in pension failures and endowment sales etc. No wonder they are scared.
Actually, I take back that its a good time to buy shares in NR. They've dropped a 30% on top of Fridays 30% fall.
A bit of history in the making. The Govt seemingly nationalised the banking industry yesterday by promising to honour depositors money. A very dangerous precedent. A green light for banks to undertake risky operations knowing that the Govt will bail them out.
Rumour has it that Alliance & Leicester plus Bradford & Bingley are in the same situation and there could be a bank run on them.
Amazing really. We've had ten years of growth under Labour built on debt which leaves us highly vunerable to economic turmoil. Anyone who believes high house prices, a trillion plus of personal debt are a good thing needs their head checking.
Nows a good time to put money into NR. 6.9% guaranteed by the Govt - you can't go wrong!
Nows a good time to put money into NR. 6.9% guaranteed by the Govt - you can't go wrong!
Didn't they say that about existing customers? As in, if people take out an account with Northern Rock then they might not be secure. They haven't really said too much about new customers, i guess they're not expecting too many people to want to move to them right now!!
Nows a good time to put money into NR. 6.9% guaranteed by the Govt - you can't go wrong!
Didn't they say that about existing customers? As in, if people take out an account with Northern Rock then they might not be secure. They haven't really said too much about new customers, i guess they're not expecting too many people to want to move to them right now!!
Yup, the statement has too many get out clauses. But many people have deposited into NR.
pookie1968uk
28-09-2007, 15:45
so whats the chance of us getting some more money added to our mortgage with them to get a new kitchen?
so whats the chance of us getting some more money added to our mortgage with them to get a new kitchen?
Don't know. I guess you'd have to make an application and see.
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