If your bank goes bust, what happens to your mortgage?

Chris1001

In the light of a number of UK banks (12 so far) having been downgraded by Moody's, what happens next? Last time RSB etc were bailed out, working on the too big to fail basis. But what happens this time? Osborne suggests that bail outs won't happen in the future, but if the Bank of England doesn't step in to bail them out, then obviously bankruptcy follows - as happened with Lehman Bros in 2008.

I understand that savings - up to £100,000 are safe, but what happens to your mortgage? Does some other institution take it on? If so, will they change the terms?

holly_hobby

The mortgage book will be re-sold - the original contractual terms entered into will remain unchanged.

Under UK regs - in the event of a provider going " bust" even without a buyer for their loan book, outstanding mortgages and liabilities will not be written off as part of the liquidation, but administered by the receivers until a buyer is eventually sought.

Holly

Thrugelmir

Most likely the mortgage book would be consolidated into NRAM and added to Northern Rock (part of) and Bradford and Bingley.

With the share holding in Lloyds added to the already nationalised lenders. The Treasury has the largest in mortgage outstanding book in the country.

Chris1001

Once upon a time, the idea of banks going bust was just a nightmare conjured up by most rabid anti-capitalist. Nowadays it doesn't even raise a derisory laugh. So far no queues outside Santander, but some of the building societies mentioned may be vulnerable - due, we're told, because of the "reassessment" of support from the UK government. If I had big savings in any of these banks, which I don't, I might be a little worried. But I do have a mortgage. I just wondered whether the mortgage would be reassigned (which has been suggested) or whether there could be a demand for the repayment of the whole lot. If this happened, of course, the whole UK would be down the Swanee, but worse-case scenarious now seem to be seriously talked about. And having read a little about the banking crisis, you realise how quickly this house of cards can fall.