The Financial Blog

So Northern Rock is falling down… or so the news would have you believe. Lets take a look at what’s happened so far:

14th September: Northern Rock get help from the Bank of England

Instantly customers get worried and so do shareholder with shares starting their 33% tumble. Queues begin to form outside Northern Rock branches of savers who are worried about their nest eggs.

17th September: Chancellor Alistair Darling guarantees Northern Rock savings

The queues haven’t got any smaller and so the Chancellor is forced to guarantee everyones savings with the Northern Rock to try to stop the bleeding, whether this will help any is yet to be seen. Huge queues are still reported outside Northern Rock branches this morning and an estimated 2 billion has been withdrawn so far.

Personally if I had savings with Northern Rock I would be taking them out as well, however I can’t help but think what might happen if Northern Rock were to go under.

My wife has a mortgage with Northern Rock, and we are in the process of selling that house so I’m not overly concerned, but I wonder what would happen if the bank did collapse on itself - would we get off scot free with the rest of the mortgage, or is their some small print somewhere that allows them to force the sale of the property to take back the money? Could the mortgage be purchased by another bank and taken over without our consent?

Also you have to wonder what would happen if you had an unsecured loan with them and they went bust - do you get to keep the money? If you are looking for a personal loan there may be worse ideas than applying with Northern Rock.

Even those the option of Northern Rock going under is a very real concern I can’t help but think that Northern Rock crashing is extremely far fetched and the bank will bounce back once more, as will those whose share prices have suffered off the back of this crisis. For those of a speculative/gambling nature a little investment in some of these cut price shares could be a shrewd move.

This entry was posted on Tuesday, September 18th, 2007 at 9:52 am and is filed under Banking. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.