Shit, I Have A Mortgage With Northern Rock!!!!

A million fucking mortgage lenders out there, and I end up with the one that lands into financial difficulties; what are the chances?

For those who have been living under a rock for the past few days, please allow me to give you a quick update. Northern Rock declared that they have been going through severe financial difficulties. 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 Blah blah blah! To cut it short, none of that really concerns me because I don’t have a bank account with Northern Rock.

However, I do have a Mortgage with Northern Rock, so i’ve been keeping my ears to the ground. I’ve been listening to the news as much as I can all day. The media seems to be focusing discussion on the Northern Rock “savers” and how they have been panicking all day. 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 in risk? If so, what kind of risk? No one seems to be saying shit about us Mortgage folks. Ok, if the media wants to discuss the whole issue with the “savers”, that’ fine, but at least give us mortgage folks 10 seconds of your airtime just to confirm whether we’re in danger or not. Maybe I’ve missed the reports where they mention the mortgage holders. But hey, I’ve listened to the news 5 times today, and I didn’t hear anything about the Mortgage holders.

Should I be inclined to believe that because the media isn’t covering the Northern Rock mortgage side of things that the mortgage holders are safe? Because you know, they’re more likely to give more publicity to the negative, as opposed to the positive.

Due to the severe lack of publicity regarding Northern Rock mortgage holders, I decided to find as much as I could online.

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 in the slightest. Am I still a little worried? Fuck yeah (I’m a cynic when it comes to money). I’m still not sure how much danger mortgage holders are in. All i’ve seen on the news today is a thousand people queue up outside branches trying to withdrawal their savings, with a financial correspondent mention how people are panicking. THAT IS NO GOOD TO ME! Please, cover more ground and mention other aspects that Northern Rock deal with, FOR EXAMPLE MORTGAGES. MY GOD!

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’s a few answers from random people, all saying that mortgage holders have nothing to worry about. I’m still not convinced, because a) I’m not sure where they got their sources from b) I doubt any of the contributors are actually anything more than the average Joe passing their opinions (which is cool and encouraging, just not helpful enough).

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 I have come in contact with, it all seems safe for mortgage holders. It does make sense that the mortgage holders are in a strong position, because as mentioned in the MSN extract, we do owe them money!! However, terms like, “you won’t see any immediate changes” worry me a little. Regardless of all the positive news for mortgage holders, a part of me will be worrying until it’s absolutely confirmed that there is nothing to worry about for Mortgage holders. I wonder how many people will remortgage at the given opportunity…

If this all blows up in my face, this could be the most unsuccessful property investment project…EVER! Now that would be kind of funny. Maybe. 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

I found that to be quite entertaining. It sounds like a line from the Movie Gladiator. I just hope they keep their word.

If anyone else has any additional information, please let me know. If I hear anything else, I’ll be sure to post it.

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14 Comments- Join The Conversation...

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Victoria 18th September, 2007 @ 09:14

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".

1
The Landlord Avatar
The Landlord 18th September, 2007 @ 09:26

Hey V,

To be honest, I think i'm safe, too, along with all other mortgage holders. I was just having an emotional moment last night lol. I still have a lot of pending questions, though. Granted, they're all cynical, like what if another lender does buy Northern Rock's mortgage debts; would our rates change..etc.

It's way too early to think about remortgaging. I wouldn't even consider that until there was actual reason to. But I wonder if anyone is considering it, just to cover their backs.

But I agree, the media are definately scaring the shit out of people. And so far there's been nothing to worry about.

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Victoria 18th September, 2007 @ 09:36

I don't think they can just change your rates according to their whim - its in a written and signed contract, and if another bank buys that part of the NR business they will still be bound by the same T&Cs until the contract is revised.

If you have a variable rate mortgage based on the bank's own variable rate then I guess a new owner with a different approach to rate-setting might have an impact. That's the only way I can see it making any difference.

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The Landlord Avatar
The Landlord 18th September, 2007 @ 09:50

I'm not sure how much strength those written and signed contracts would hold if the new owner trade under a different name to Northern Rock. I'm not entirely sure how it works. But I think you're right, I don't think they can just change all the T&C.

Yeah, I was also thinking about the variable rate situation. I agree, I think that's the most obvious scenerio where rates could slightly alter. Of course, it could go either way, in that case.

But apparently interest rates are going to fall slightly, in general. I'm not sure how much of that is true, though. I heard some financial analyst mention it on the news last night.

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Fiona louisa 18th September, 2007 @ 16:01

I think we are pretty much safe ( ive got a mortgage with northern rock too )because by law , like it says , if they do go bust the only thing will change is that of the address we pay our money to each month , which isnt much !
Nothing else can happen.

But yet again its just the media grabbing at a story and running with it .... do you really think it will be even on the news in 2 weeks !?

It makes me laugh really , itv news where interviewing ppl that where queing outside of NR to withdraw there savings , and they where all saying basically the same thing . The whole ' I dont want to loose all my savings blah blah '

lol its not a christmas savings catalogue . Has any savings bank stolen thousands of peoples money . EVER .

I doubt it .

anyways , rant over .

fee

btw ... really like the website . I got lots of tips when buying my first renovation so THANKSS

5
The Landlord Avatar
The Landlord 18th September, 2007 @ 16:12

Hey Fiona,

I'm glad you found my website useful. Many thanks! How did the renovation go?

As i've said, I think we'll be fine, too. Although, I'll still be crossing my fingers...a little :)

Earlier, I mentioned in a forum thread that when i was watching the news and listening to the "savers" in the queues, it was kind of like watching Pop Idol. You know at the stage where people queue up outside the studio and discuss their emotions. It was quite funny.

No one watches Pop idol for the main auditions, it's the initial phase where the judges filter out all the useless acts that captures all the entertainment. Same sort of thing applied with the whole NR saga- I just wanted to hear/watch more people express their concerns whilst standing in the queues for hours.

People were queuing from early hours of the morning, it was quite surreal :)

6
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David Jones 22nd February, 2008 @ 09:01

The latest is that NR want to run down their business and charge higher than average on the variable rate. I'm fixed into a good deal at the moment but worried about what will happen at the end of the cheap deal. If this is their new business plan it seems worrying to do this. Surely the good customers will easily remortgage. However with tighter conditions and dropping valuation prices and ratios those struggling the most will find this difficult. - Leaving Northern Rock with a lower quality mortgage book of borrowers more likely to default because the rates are higher than everyone else's.
- Am I missing something?

7
The Landlord Avatar
The Landlord 22nd February, 2008 @ 09:34

Hey David,
I'm also in a good position right now, because I have a fixed rate deal, but I will definitely need to consider remortgaging if their standard variable rate is in fact, higher than the market average, as you suggested.

If what you say is true, then you're right, they may lose a lot of borrowers- which doesn't make much sense. At this point, their mortgage sector is their most secure and profitable department. One possibility is that they may have A LOT of people tied into variable rate deals, and they may recoupe a large portion of their losses if they increase rates, even after losing a few of the borrowers that aren't tied in.

Regards.

8
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Wayne 6th April, 2009 @ 11:16

Hi Folks

Coming in a little late here (1 year since the last post!).

I'm going for a house move and remortgage if I'm lucky enough. But my broker says he can only get us a (re)mortgage with Northern Rock GULP!.

Is everything safe with them now?.

Thanks

Wayne

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The Landlord Avatar
The Landlord 6th April, 2009 @ 11:29

Hey Wayne,
Now that NR are nationalised (owned by the Government) they're pretty safe.
Out of curiosity, are you getting a good rate from NR?

Kind regards

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Wayne 6th April, 2009 @ 12:52

Wow, fast reply, thanks :-)

Our broker is still "Thrashing out" a deal so I can't answer that I'm afraid. I'll let you know what we're offered (when and if we get it).

Thanks

Wayne

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andy baylis 14th November, 2010 @ 21:39

my mortgage was taken out with nortern rock plc and now been changed to norhern rck assetts i have never never sighned up to be apart of this new company and hope to be compensated for this as i am loosing out on a cheaper rate and n tought of mine

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Lorraine 9th February, 2011 @ 20:19

My daughter is coming to the end of her 5 year fixed deal with NR... while the country has been paying nice low interest rates she's been stuck at 6% ... now at the end of the fixed term she should be coming down to 2% above base rate.... NR asset management have written to say they will not be honouring that part of her deal and it would now be in her interests to seek a new mortgage with another lender as they are not competitive!!!!!!!!!!!!!!!!! Has anyone else had a letter like this and how do you stand legally... this just seems so wrong!!

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Miss Mini 16th March, 2011 @ 21:14

My broker has said he may be able to get a remortgage to NR and im a bit worried to say the least!

Am i wrong to panic or is all this NR drama over?

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