Northern Rock Rescue Plan

Northern Rock Rescue plan - How is Your Mortgage Affected?

The most likely scenario for the beleaguered Northern Rescue package is a rescue plan involving Virgin or another private firm with hefty government guarantees. This solution, if accepted, falls short of full nationalisation but it does rely heavily on government guarantees. It will also cost the taxpayer billions over the next decades.

Northern Rock Mortgage Holders will largely be unaffected by the takeover. Generally speaking if it is taken over by Virgin, existing mortgage deals will be honoured. If the bank had gone into administration it may have been more uncertain; in particular, existing customers may have lost special mortgage deals like fully flexible mortgage payments with no fees.

If Virgin does take over, it is likely to try and rebrand the company selling more current account mortgages. Focusing on simple basic mortgage deals; it would probably retreat from the subprime market, making it more difficult to get 100% mortgages and mortgages for those with bad credit.

Northern Rock Savings Account

The Northern Rock savers will also be largely unaffected by this deal. Deposits are still guaranteed by the government. To ease the bank’s cash flow crisis they are currently offering some of the most competitive rates. For example a tracker online savings account is giving an interest rate of 6.49%

It could be the biggest loser from the Northern Rock rescue plan is the British tax payer. The government will be exposed to Northern Rock’s liabilities for many years to come

• Darling’s rescue plan at the Guardian
  

BTW: Northern Rock has by far the highest loan to value ratio. It lends on average 59% of the value of a home (rising to 68% for subprime). This is the highest rate out of any of the top 10 UK mortgage lenders