Landlord Products / Services
A million fucking mortgage lenders out there, and I end up with the one that screws it up and lands into financial difficulties. What are the chances?
For those who have been living under a rock for the past few days (pun intended), Northern Rock have declared severe financial difficulties, consequently the news has been filled with footage of a billion people queuing outside their local Northern Rock branches, all frantically trying to withdrawal their savings.
But what about the borrowers with NR mortgages?
Northern Rock’s shares, which had lost 32% on Friday, fell from 438 pence to 282.75 pence. Consequently Northern Rock savers have been rushing to branches to withdrawal all their savings…etc To cut it short, none of that really concerns me because I don’t have a bank account with Northern Rock.
I’ve been listening to the news as much as I can all day to see if they mention anything about their mortgages, but the media seems to be focusing discussions on the Northern Rock “savers” and how they are in a state of disbelief and fear.
However, since then it’s been confirmed that savers are guaranteed that they won’t lose any of their savings.
the Chancellor has made it clear that all existing deposits in Northern Rock are fully backed by The Bank of England and are totally secure during the current instability in the financial markets.
That’s GREAT! But what about the people that have mortgages with Northern Rock? Throw us a freakin’ bone here! Is it me, or is there barely anyone talking about that issue?
Are we safe?
Are we at risk?
If so, what kind of risk?
No one seems to be saying anything about us Mortgage folks. Should I be inclined to believe that because the media isn’t covering Northern Rock’s mortgage sector that we are safe?
I found an article on the BBC news website, What if Northern Crock Rock goes Bust that mentioned mortgage holders:
Contrary to some comment, they have the least to worry about. If a mortgage lender goes bust, no one will come round trying to repossess borrowers’ homes to get the money back.
In reality all that would happen is that the administrator would send borrowers a letter, telling them to keep on paying their monthly repayments. In the meantime the mortgage, along with all the others, would, in all probability, be sold off to another mortgage company who borrowers would then pay for the remaining life of their loan. Alternatively another bank might buy up the insolvent bank – lock, stock and barrel.
The mortgage business is, in normal times, both steady and profitable, and there would be no shortage of buyers for the Northern Rock’s loan book.
Hmmm…it clearly implies that mortgage holders should breath easy because we have little to worry about. Am I convinced? Not really.
I also found this discussion on “yahoo answers”. Someone in the same situation as me asks how the financial difficulties will affect her, as a Northern Rock mortgage holder. There are a few responses, all implying that mortgage holders have nothing to worry about.
I’m still not convinced!
MSN news also reported:
If you are one of the 800,000 people who own a mortgage with Northern Rock, you won’t see any immediate changes. After all, you owe Northern Rock money, they don’t owe it to you!
If any bank goes bust, the streams of income from the mortgages are valuable and will be sold on to a buyer. All that would change is the address to which you would send future payments.
From the limited information available, it does seem to be safe for mortgage holders. However, if this ends up blowing up in my face, this could be the most unsuccessful property investment project…EVER! Now that would be kind of funny. Not!
And just for light humour, this disclaimer is on the Northern Rock homepage:
These have been troubled times but Northern Rock will prevail. We will not let you down
If anyone else has any additional information, please let me know. If I hear anything else, I’ll be sure to post it.
Disclaimer: I'm just a landlord blogger; I'm 100% not qualified to give legal or financial advice. I'm a doofus. Any information I share is my unqualified opinion, and should never be construed as professional legal or financial advice. You should definitely get advice from a qualified professional for any legal or financial matters. For more information, please read my full disclaimer.
I think you're safe, mate - the government and central bank have bailed them out to cover all the savings they currently hold, so in effect even if everyone withdrew their money NR would still be viable and solvent. And, as you've said, you have their money - not the other way around. I think people are just panicking because 1) they're cynical, 2) they don't understand what's going on and have been scare-mongered by the media or 3) even if their savings are "covered", having to potentially wait to be reimbursed as part of some compensation deal is going to make the money inaccessible to them for some time.
And in any case - what's your alternative? Its not worth remortgage penalties "just in case".