What's the deal after the mortgage shuffle?

dopester

danm wrote: »

In fact their loans are still performing extremely well

We'll see how they fare over next year or so, but in today's news it was reported there has been some deterioration in their mortgage book.

Nationalised-lender Northern Rock says the UK mortgage market remains "uncertain" and arrears have increased.
The Newcastle-based bank said mortgages in arrears for at least three months stood at 0.95% of total lending on 30 April, up from 0.57% on 31 December.

Generali

The things is the various bits of alphabet soup actually reduced the risks to Northern Rock as it meant that they were borrowing long and lending long. The problem they had was they didn't keep enough cash in reserve which made them vulnerable and then got hit by a run which was mostly bad luck (although partly their own fault for keeping low reserves).

WTF?_2

FraudBuster wrote: »

My understanding is that LloydsTSB came along as a "White Knight", had a quick look at the business, and ran away as fast as they could.

You only have to read these Boards to understand the quality of their mortgage book.

Indeed - it's anecdotal but the number of time that "I have a Northern Rock 'Together' mortgage" comes up in conjunction with problems on MSE is pretty amazing.

Not to mention that any time there's a news story about someone getting spectacularly burned by property speculation it always seems to be an NR mortgage.

Alan_M_2

Sailing a little close to the wind is a long long way from a fundamentally flawed business plan. Yes, they required funding, caused by a risk business model and an unprecedented unavailability of short term finance, they even obtained the borrowing required.

The run was caused by what I consider to be short sighted media reporting at best, scaremongery or actively seeking to bring a bank down at it's worst.

There was no fundamental financial reason for this bank to be in the position is found itself (having to be bailed out completely), of course it had funding problems (short term problems) the reporting of these problems in a glaring Las Vegas like manner are responsible for the government having to bail the bank out.

The entire fiasco could have been handled in a far better manner, but our need for media sensationalism fed the the embers and generated a fatal fire.

IveSeenTheLight

IveSeenTheLight wrote: »

Very interesting article about the effect of the mortgage shuffle.

http://news.bbc.co.uk/1/hi/business/7329151.stm

Just to get back on track, this was not another Northern Rock Thread.
It's an interesting article which could help many people in different circumstances

BobProperty

Sticking with Northern Rock, how long did it work as a successful mutual? 100 years? The business plan when it became a plc was flawed because it involved too much exposure and reliance on the credit market as a number of posters have already pointed out. Not keeping sufficient reserves for the volume of lending got it into trouble. The fact that Robert Preston let it out prematurely that they were in trouble might not have helped, but it also might only have delayed the run on the NR until the Monday after. All the weekend papers would have got the "city" inside opinion and ripped into NR over the weekend. So the run started a couple of days earlier, so what?

IveSeenTheLight

BobProperty wrote: »

Sticking with Northern Rock

Too many threads have gone off on a tangent instead of sticking to the original posters points.

If you want a Northern Rock Thread, why not start your own Northern rock thread?

Generali

IveSeenTheLight wrote: »

Too many threads have gone off on a tangent instead of sticking to the original posters points.

If you want a Northern Rock Thread, why not start your own Northern rock thread?

If you want to control an entire conversation, don't do it on a website like this! The posts always go off on tangents.

abaxas

GRRRR. Why do we keep rehashing the NR debacle?

Lack of cashflow kills business faster than anything. A bank is no different.