Northern Rock Nationalisation (and switching your mortgage)

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Northern Rock - Switching Your Mortgage

Northern Rock featured prominently in the news during 2007 and early 2008 as consumer confidence in the company fell fast.

Borrowers queued outside branches to withdraw their savings, the share price tumbled, and the Bank of England stepped in to rescue the troubled mortgage lender.

What is Nationalisation?

Nationalisation is an extremely rare process, and usually only takes place in times of crisis. The actual process means that a privately-owned company is taken over by the government and placed under public ownership.

For the average borrower with Northern Rock, savings are safe and guaranteed by the government. Over a million people have their savings in Northern Rock. For those people who have mortgage loans with Northern Rock, their homes are safe, although Northern Rock may divest their mortgage book to other companies.

Northern Rock: Key Events Timeline

• 2002 - 2007 – The genesis of the Northern Rock crisis starts in America where millions of dollars are lent to low-income borrowers. When US interest rates increase in 2004, many cannot meet repayments, and the sub-prime crisis begins.
• July/August 2007 – Turmoil in the UK stock market causes banks to tighten inter-bank lending. Amidst this backdrop, it becomes clear that Northern Rock, who had a high level of exposed risk to the sub-prime crisis, are in trouble.
• Late August 2007 – Northern Rock hunt for a possible buyer and begin to discuss support with the Bank of England.
• September 13, 2007 – News breaks that Northern Rock have sought emergency funding from the Bank of England, confirmed on 14 th September
• October 1, 2007 – The Bank of England change legislation to guarantee 100 per cent of bank and building society savings up to £35,000. This guarantee extends beyond Northern Rock to all new deposits.
• November 2007 – A potential rescuer emerges in the form of Richard Branson. The chief executive of Northern Rock, Adam Applegarth, announces his resignation and leaves in mid December. Olivant group steps up as a competitor to Branson.
• January 2008 – Bids by rebel shareholders are put down, and the treasury plan to rescue Northern Rock by selling government backed bonds.
• February 2008 – Olivant withdraw and Branson cannot offer favourable terms. On 17 th February, the government announces a period of public ownership of Northern Rock which is passed shortly afterward. Northern Rock is nationalised.

Northern Rock news

• Northern Rock confident in mortgage market
• Northern Rock slashes mortgage range
• Reduced range of mortgages from Northern Rock
• Northern Rock mortgage rates reduced
• Northern Rock mortgages performing well
• Northern Rock Pulls Plug on Sub-prime Lending
• Northern Rock not planning graduate mortgages
• Northern Rock mortgages next step
• Northern Rock mortgage holders should not worry
• Northern Rock chaos will influence mortgage market
• New Northern Rock mortgage plan
• Northern Rock scraps high LTV mortgage products
• First-time mortgages from Northern Rock not risk-free

More Information

• Switching your mortgage
• Northern Rock lender profile