Northen Rock [Merged Threads]

mrp45

The thing is that I no longer trust Northern Rock, and I suspect a lot of savers and investors will be thinking the same. For example, the statement they have released today (http://companyinfo.northernrock.co.uk/downloads/results/stockEx140907.pdf) states that they are a 'prime only lender', yet on their website just last night there was a flash banner advert proudly saying "OPEN FOR SUB-PRIME BUSINESS"!

Other banks are not in the smae position as NR are (yet), so therefore they look like a better place for me to put my hard-earnt!

isofa

What a panic, hopefully people won't just read the title and hype it up even more. You cannot compare the collapse of BCCI or Barings to banks which deal with personal finance. NR won't go bust, they are just having a tough time.

Good time to buy shares in them me thinks

dawnylou

IF they were to collapse - what would happen to those who have mortgages at NR?

$$$_12

MarkyMarkD wrote: »

Whilst NR's lending is marginally more risky than other high street lenders', it is nowhere near sub-prime.

So why are they "Open for sub-prime business"?

http://www.northernrock.co.uk/intermediaries/intermediaries_index.asp

We can now offer you and your clients a full range of sub-prime mortgage products from Niche Prime to Unlimited – a wide choice designed specifically to meet all of your needs.
NEW! Sub-Prime product range launched offering a free mortgage valuation complimenting our existing range of products.

http://www.northernrock.co.uk/intermediaries/specialist-lending/index.asp

molerat

dawnylou wrote: »

IF they were to collapse - what would happen to those who have mortgages at NR?

You will owe the money to the liquidators .... simple eh !!

People who have money borrowed from or invested in NR have no real worries. The only ones who need to worry are those who have paid over the odds for property as this is incident bound to have a knock on effect on lending and eventually house prices.

teralin

Of course investors in Northern Rock need to worry. The reason they are in this mess is because they cannot get other banks to lend to them at any price. They are considered a high risk. The B of E has bailed them out of their current situation for political reasons only. Now, investors are pulling their funds out of Northern Rock and the downward spiral will continue. Northern Rock's cavalier attitude to lending to people with unproven credentials has come home to roost. I think heads will roll in that company - and very soon.

I thought that the following letter to the BBC money site was interesting:

"Northern Rock may be financially solvent: it is not, however, morally solvent. Its credibility is shot, and as part of the problem it met the MPC's criteria for not being supported.
That being said, the Bank had to recognise the political reality that failing to be there in last resort would reopen the gaping pit of the Great Crash, that investors would have no cetainty their investment in the banking sector would be safe and that a flight to quality would follow. In this respect, the MPC's earlier announcement was unfortunate, however comprehensible it may have been considering the costs of such support.
And that's the problem: the fear of the consequences has caused a kind of political paralysis in planning which rather more resembles the plight of a rabbit in front of a python than a well-managed economy.
Faced with such a problem, the Government has failed to force the banking sector to clean up its act by immediately recognising the potential losses and clarifying the uncertainty caused by allowing them complete confidentiality: an awareness of where the problems actually lie would seem to be an essential prerequisite for the Bank's decision-making, and that's justr not happening.
All the Bank's doing is adding ;ore air to the bubble, which will simply make a bigger bang when it finally pops, possibly taking the Bank with it."

dunstonh

It just goes to show how lack of understanding on how these things work coupled with poor media reporting can make some consumers act irrationally.

Northern Rock is in no danger of going under. It has fallen foul of the ability to borrow money which is having an impact on all banks. Because Northern rock borrow the money to lend on new mortgages (which most banks do), this is a problem for them more most other banks as it is their core business. If they cannot borrow money, they cannot lend it. If they cannot borrow it cheaply, they cannot lend it cheaply which makes their deals less attractive. Both of those things hits their profits and the stockmarket doesnt like that. So, a big drop in share price is inevitable.

MORPH3US

Have seperated this out from the other Northern Rock thread as this is about investment, not savings - hops thats ok....

Given the wide spread news about Northern Rock and the amount their shares have fallen, over the next few days, should I be tempted to buy NR shares?

If everything we are being told by the BoE is true and they are just financing them through temporary market conditions then buy now cheap and then sell high in 6 months when all this blows over?!?!?

purch

IF they were to collapse - what would happen to those who have mortgages at NR?

Firstly...they won't be allowed to collapse. Depositors money is not at risk currently, the problems the 'Bank' ( it pains me to call an outfit like this a Bank ) are facing are liquidity based. The only way Depositors money will be at risk is if a sizeable chunk of their £113bn assets ( mortgages ) default, and if that happens the whole financial market will be collapsing too !!!!!

Secondly...If the business continues to struggle raising funds and the business in it's current form is deemed unviable, Northern Rock well might be broken up and sold off, so if you have a mortgage with them it is most likely to be bought by someone else, and you will then owe the funds elsewhere.

purch

Personally I think that Northern Rocks business model is being shown to be less than viable.

The idea of raising money through the moneymarkets to fund a single asset class ( property ) is fine when Liquidity is there, and the markets attitude to risk is lax.

Unfortunately the liquidity in the money markets over the last 5 or 6 years has been created artificially and intentionally by Central Banks and Governments, and the market has had a soft attitude to risk.

Personally speaking I think this reassesment of risk in the money markets will be a long term matter, and that businesses that have relied solely on this liquidity to fund themselves will struggle to be as viable as before.