Northern Rock

I can't believe people are being so naive about this. I blame the BBC etc as they have made SUCH a mountain out of a molehill, and at the same time totally confused vast parts of the public who don't know what underpins banking.

Totally irresponsible reporting.

could you explain it for us Drew?

I havent seen much news so dont know much detail. Unconnected with current story - I have always had a negative perception of this bank, for two main reasons, they seem to lead the way with mortgages over 100% and secondly (and this is really old perception) I remember from years back their house insurance policies were mega compared with what we quoted at DL at the time..(1992...so old as I say..!)

in the 2 mins of writing that post - Just seen a snippy snappy shot of news on sky about queues f people............

NR's business plan is set around mainly mortgages, will little provision for having deposits to back that up. Nowt wrong with that, very few banks actually use their deposits to lend, they use the money market and other banks.

Interbank lending goes on ALL the time. Just last week, Barclays requested the same thing from the BoE as they couldn't make all their BACS payments one afternoon due to a cash shortage, and other banks wouldnt lend it to them.

Banks are not lending to each other at the moment because of uncertainty in the US over sub prime lending, therefore NR found itself POTENTIALLY (they have yet to use the facility) short so asked the bank of england to use the 'lender of the last resort' mechanism.

What people done seem to get, is that the BoE is there pretty much for that purpose - to keep the banking system from collapsing. In the past month, the European Central bank has done the same thing for three Spanish Banks.

The BBC however, made a huge hoo haa about it, and now that savers ARE withdrawing their funds, the situation could easily get worse. NR is actually a very asset rich bank. The Bank of England would NOT have made an unlimited facility available if the bank was in danger of collapse (remember Bearings Bank? They applied for this but didnt get it as they were a gonner).

SOOOO, its all a big fuss over nothing to be honest, although if savers keep withdrawing money, the bank WILL have to use the facility (which is a loan BTW, they pay it back) which will no doubt be reported irresponsibly again, and the situation will escalate.

(BTW, I got my first mortgage with NR and would not have been able to get on the property ladder without them, even though I could easily afford the mortgage)

I agee with Drew, there is some serious over the top reporting going on. Northern Rock is a million miles away from closure and people are now panic closing accounts because of media hype.

Crazy story...police at some branches...I have just watched the news!!!

I can understand people withdrawing their money though. If I had money in there Id probably take it out. Part of the panic is a lack of trust in the banking system.

WormThatTurned wrote:

I can understand people withdrawing their money though. If I had money in there Id probably take it out. Part of the panic is a lack of trust in the banking system.

Oh I can understand it, after all they have been driven into a frenzy by the media and are panicking that they will lose there life savings in many cases. A pity they have not been reassured though.

dididave wrote:

WormThatTurned wrote:

I can understand people withdrawing their money though. If I had money in there Id probably take it out. Part of the panic is a lack of trust in the banking system.

Oh I can understand it, after all they have been driven into a frenzy by the media and are panicking that they will lose there life savings in many cases. A pity they have not been reassured though.

I don't even know whether its a case of that or not though. Northern Rock could go bust. All the BBC headlines that I saw clearly said that it was not expected that this would happen. At least people are given the choice this way. I must say that if I carried investments with Northern Rock then I would probably withdraw the funds. When it's gone, it's gone. I'd rather have the security of not taking the risk. People who save with building societies tend not to be risk takers, hence the queues at the door all weekend.

Few points, firstly it will not go bust rather someone will step in and buy it as it is asset rich with a large mortgage book and will now look very cheap to a prospective buyer following the 25% fall in the share price.

Secondly savers funds are partially protected under the banking insurance scheme and it does show that you should have funds spread around in more than one bank to spread the risk.

Third the business model does have its flaws, it is not alone in having an inbalance between borrowers and savers unlike some of the bigger banks who are far more balanced in their portfolio.

Finally it was brilliant timing as I'm teaching my AS Business Students cash flow at the moment.

atticusuk wrote:

Few points, firstly it will not go bust rather someone will step in and buy it as it is asset rich with a large mortgage book and will now look very cheap to a prospective buyer following the 25% fall in the share price.

Secondly savers funds are partially protected under the banking insurance scheme and it does show that you should have funds spread around in more than one bank to spread the risk.

Third the business model does have its flaws, it is not alone in having an inbalance between borrowers and savers unlike some of the bigger banks who are far more balanced in their portfolio.

Finally it was brilliant timing as I'm teaching my AS Business Students cash flow at the moment.

Totally mad panic and I too blma ethe reporting for sensationalising the problme the NR is haveing. I even heard on the BBC radio today people speculating how this could spread to the other banks, if people specualte long enough to fill air time then it will probably happen.

The investors money is safe apart from anything else the government backed insurance scheme will give then 90+% of their money if NR should go bust... BUT it won't. When the share price goes low enough it will be bought up by another bank.

I'm thinking of buying some shares......

Northern Rock is a dead duck now, who's going to have a mortgage or invest in a brand who's name is damaged beyond repair ?

drewboy wrote:

I'm thinking of buying some shares......

Possibly a good idea.....especially if one of the takeover bids is successful!

WormThatTurned wrote:

Northern Rock is a dead duck now, who's going to have a mortgage or invest in a brand who's name is damaged beyond repair ?

They wouldn't be buying the name, they would be buying 18% of the UK mortgage market.

buying shares would have to be a good move..!

so.....are we starting a consortium, then?

drewboy wrote:

WormThatTurned wrote:

Northern Rock is a dead duck now, who's going to have a mortgage or invest in a brand who's name is damaged beyond repair ?

They wouldn't be buying the name, they would be buying 18% of the UK mortgage market.

I was looking at it from the customers point of view !!

Paul99ine wrote:

so.....are we starting a consortium, then?

Yep, I am in

I have 6p in my purse, plus change from a tenner from a pub round tonight...

That should buy me a small branch or so ...

helencbradshaw wrote:

Paul99ine wrote:

so.....are we starting a consortium, then?

Yep, I am in

I have 6p in my purse, plus change from a tenner from a pub round tonight...

That should buy me a small branch or so ...

Maybe if all the folks on here contributed 6p we could buy the whole caboodle!

WormThatTurned wrote:

drewboy wrote:

WormThatTurned wrote:

Northern Rock is a dead duck now, who's going to have a mortgage or invest in a brand who's name is damaged beyond repair ?

They wouldn't be buying the name, they would be buying 18% of the UK mortgage market.

I was looking at it from the customers point of view !!

Ah, see working in the industry, it's sometimes easy to forget about them....

I think theres Enron style risk taking going on in the banking mortgage sector with guys like NR and the goverment just bank-rolled it. Madness. Alliance & Leicester are next to apply for the BOE supprt, by all accounts. Mervny King, the BOE head, will have to resign now to restore confidence in the city.

Wish I hadn't sold my shares in NR now, thouhg the money did come in handy about 10 years ago.

surely if you had kept them they are not worth much....?

not following this that closely but I thought a lot had been wiped off share price..

now is the time to BUY not SELL!!!