Should I close my Northern Rock Account?

webdeepak

I have seen that shares of Northern Rock fall from 1248p to 693 today.
It is almost the price it had around 2000 http://uk.finance.yahoo.com/q/bc?s=NRK.L&t=5y&l=on&z=m&q=l&c=

Seeing that we have just seen the tip of the sub prime iceberg, Is this bank going bust? Should I move my money?

Also can some one explain if a bank goes bust how much money in a bank is safe?

ceebeeby

?????? If you have a mortgage with a bank going bust ... what happens then? Don't we have to pay anymore (she says with so many fingers and toes crossed you wouldn't believe it!) ... I suppose naive question.

Soz webdeepak, I'm not very financial ... didn't even know they were going bust!

MarkyMarkD

It hasn't fallen from 1248p today at all - it's only fallen by around 45p.

There is no risk at all of losing your money from NR going bust.

Nor are NR going to go bust.

If it got anywhere remotely close to going bust, the business would be taken over as a going concern by another bank.

In any case, you would get your money back.

As regards mortgages, they would still be due to the business, or its successors or administrators.

webdeepak

If it goes bust, someone will buy it. You still have to pay in full but they might say 50p to a pound for creditors. Do know!! thats why I have put this thread for people to respond.

ManAtHome

5 years ago it was around 600 (from the graph) - went up fairly recently as a lot did probably due to all the buyout money sloshing around. They originally floated at 350, so still in front.

Anyway, your money has some protection - if they go bust and nobody wants to buy them (unlikely), you get 100% of the first £2k and 90% of the next £33k (backed by government/BoE).

webdeepak

MarkyMarkD wrote: »

It hasn't fallen from 1248p today at all - it's only fallen by around 45p.

There is no risk at all of losing your money from NR going bust.

Nor are NR going to go bust.

If it got anywhere remotely close to going bust, the business would be taken over as a going concern by another bank.

In any case, you would get your money back.

As regards mortgages, they would still be due to the business, or its successors or administrators.

Mark, The price of 1248 was in the begining of this year and today is 693. Sorry if there was any confusion. But loosing almost 50% value is 7-8 months is a scenario of going bust.. No businesss closes in a day. it takes time. and my question is is it in the line. Please provide facts. Not blank statements that ITS NOT GOING BUST.

cifpower

I doubt that Northern Rock will go bust. Not something that really happens to banks! The problem is, NR is quite exposed to the sub-prime problems in America and, as a result, the shares have been hit. But so have other banking stocks. What will happen is that they will tighten lending criteria and raise their mortgage interest rates - which they have already done.

if the worst comes they will more than likely be taken over.

MarkyMarkD

Er, it's a fact. It won't go bust.

NR is a very, very profitable business.

The recent sub-prime problems in the US may, possibly, restrict NR's expansion in future. But they won't stop it being a profitable business.

Nobody has lost money through a mainstream UK bank going bust in donkeys' years and nobody is about to do so.

gt94sss2

webdeepak wrote: »

Mark, The price of 1248 was in the begining of this year and today is 693. Sorry if there was any confusion. But loosing almost 50% value is 7-8 months is a scenario of going bust..

The share price falling 50% over a period of 7-8 months is not a 'scenario of going bust' - even a share losing 50% in a week isn't..

Virtually all the share prices of UK banks are down at least 25% this year.

The reason for the falls in the Northern Rock share price is that the recent 'credit crunch' in the markets mean that Northern Rock may not grow as fast as expected in the future due to the way it borrows money to fund loans etc..

Its not going bust and won't - someone would buy it. In fact there are already rumours that some banks like HSBC are interested in it - as they are not affected by the 'credit crunch' in the same way.. and so could continue to grow Northern Rock at its old rate..

Regards
Sunil

ManAtHome

Although I think it may become less profitable due to buying cash on the "spot market" unless the credit crunch thingy wears off quickly.

MarkyMarkD

Yes, less profitable. But not unprofitable.