Northern Rock to lower savings rates ?

Fella

If it's nationalised, shouldn't 100% of all deposits be guaranteed for as long as it stays nationalised? (i.e. like Nsandi savings are....)

I guess the real answer is no-one is quite sure how this'll work, since Brown is making it up as he goes along.

bristolleedsfan

Fella wrote: »

If it's nationalised, shouldn't 100% of all deposits be guaranteed for as long as it stays nationalised? (i.e. like Nsandi savings are....)

.

Yes in theory, the difficulty lies in fact NR is going to be ( so they say) run on commercial grounds which by definition isnt fair on Building Societies and Banks if NR are competing with them backed by cheap funding and a 100% savers guarantee.


( National Savings doesnt compete aggressively for savings nore does it offer morgages, so is little threat to the Banks And Building Societies)

tawse57

If they remove the 100% guarantee for deposits then you will see vast sums of money being taken out of NR by savers.

NR is screwed. They need savers so they need really good saving rates. At the same time they want to get rid of their huge amount of mortgage debt and seem to think that they can up their mortgage rates/refuse to remortgage people so people will have to go elsewhere to get mortgages. Alas, people might not be able to get a mortgage anywhere else and hence, if NR does this, you could see lots of reposessions and/or tumbling house prices... which is the last thing Gordon wants.

It is a mess.

The whole banking system is in a mess.

One thing is certain - prudent savers are being screwed.

Steve_xx

tawse57 wrote: »

If they remove the 100% guarantee for deposits then you will see vast sums of money being taken out of NR by savers.

NR is screwed. They need savers so they need really good saving rates. At the same time they want to get rid of their huge amount of mortgage debt and seem to think that they can up their mortgage rates/refuse to remortgage people so people will have to go elsewhere to get mortgages. Alas, people might not be able to get a mortgage anywhere else and hence, if NR does this, you could see lots of reposessions and/or tumbling house prices... which is the last thing Gordon wants.

It is a mess.

The whole banking system is in a mess.

One thing is certain - prudent savers are being screwed.

I can't see the guarantee being removed anytime soon. The UK government will stall any pressure from the EEC to do so for the time being.

I think the idea is to stabilise NR, rather than run it off. Therefore it has to remain competitive. If people need to go elsewhere for their mortgages they should have little difficulty in doing so, providing that they are not risky business, as banks can only function if they are lending their depositors funds. If NR customers are risky then they might find that they have to stay with NR, albeit at rates that may be a tad higher than the average. In any case, it's not only NR mortgagees that might have difficulty in moving their mortgages; mortgagees who are currently with other banks might have difficulty shifting their mortgages if the bank that they wish to transfer to feels that they are too risky.

Yes, the banking system is in a mess, due largey to imprudent lending and lessons may be learned. I don't thing savers are being "screwed". Nothing detrimental has happened to any saver as yet.

Aegis

I fail to see how prudent savers are being screwed too. If you use a couple of accounts with different institutions, you can still get a rate of 6.4+% without too much effort, instant access and covered by the FSCS...

RayWolfe

All the above is true but the nature of the guarantee is not, and never was, given in perpetuity.

Reestit_Mutton

RayWolfe wrote: »

All the above is true but the nature of the guarantee is not, and never was, given in perpetuity.

I agree with RayWolfe here. The exact terms of the agreement between NRK and HMG regarding the depositor guarantee aren't (to the best of my knowledge) publicly documented.

However, one part of that agreement that is well-known is that HMG will give no less than 3 months' notice if they wish to withdraw their depositor guarantee. i.e. the agreement clearly gives HMG an exit strategy for the guarantee if they so wish to use it.

That said, now that HMG has effectively taken NRK in its entirety onto its own books, removing the guarantee prematurely without significant pressure from the EU to do so could have seriously negative ramifications for the taxpayer. For this reason alone, while HMG still owns NRK I would expect it to fight tooth and nail with the EU to keep the guarantee in place.

The whole situation is a shambolic mess.

RM

dougz_2

RayWolfe wrote: »

the nature of the guarantee is not, and never was, given in perpetuity.

Well there is absolutely no time limit mentioned on their savings front page selling the product, or via the hidden link to the treasury 9 Oct PR (which is not even underlined on their advert):

Our new guarantee arrangements with the Bank of England and H.M Treasury guarantees all new and existing retail deposits with Northern Rock. It protects... all savings in all accounts, regardless of the amount deposited.

There is no time limit mentioned in the terms pdf either.

So, if they ever remove that unlimited guarantee I think all depositors since 19 Sep should be due compensation for the breach of contract. At the very least they should be compensated for the loss of interest incurred by moving the amount of their deposit greater than £35k elsewhere that they can get the equivalent insurance. This difference could get quite large for those with 6.9% bonds if the BOE rate falls.

bristolleedsfan

dougz wrote: »

Well there is absolutely no time limit mentioned on their savings front page selling the product, or via the hidden link to the treasury 9 Oct PR (which is not even underlined on their advert):.

http://companyinfo.northernrock.co.uk/corporateRelations/yourQuestionsAnswered.asp


" The guarantee arrangements will remain in place during the current instability in the financial markets "

dougz_2

bristolleedsfan wrote: »

http://companyinfo.northernrock.co.uk/corporateRelations/yourQuestionsAnswered.asp

I don't think you can expect some separate FAQ page that you have to search for to be a formal part of the legal contract.

Especially one that is so vague as to be meaningless. For example who is to define which financial markets, and whether they are stable or not? A depositor could still feel the markets are unstable 20 years from now.

Also, that page specifically says it covers "All term deposits for the duration of their term", which could be up for the next 3 YEARS at least.