Northern Rock Customers Withdraw Savings

Yesterday, customers from Northern Rock withdrew an estimated £1billion in savings from the Northern Rock. Their helplines were jammed, and their website crashed.

The panic withdrawals came about because the Bank needed to borrow from the Bank of England as lender of last resort. This is the first time a UK bank has done this since 1973.

Despite the panic on the high street and the share price tumbling, Ministers and officials from the FSA said there is no danger of Northern Rock going bankrupt.

Queues formed at Northern Rock building societies around the country. They have 70 different branches and hold deposits of £24bn from 1.5 million savers and most significantly lend to 800,000 homeowners.

Should I withdraw Money from Northern Rock?

There is little to fear from losing your savings. It is in the interest of the Bank of England and the whole financial sector to prevent a bank / building society become insolvent. This is why the Bank of England is willing to act as lender as last resort. Because banks can always lend from the Bank of England their liquidity is assured. This gives confidence to savers and, in theory, should prevent mass withdrawals.

see also: are mortgage lenders likely to go bankrupt

Should I get a mortgage with Northern Rock?

Nothern Rock have some attractive mortgages and there is no reason why you shouldn't get a mortgage with them. Although, at the moment you may prefer to use an alternative lender, just because of the anxiety created by the adverse publicity. - Northern Rock Mortgages

Should I sell Shares in Northern Rock?

Whatever happens profits at Northern Rock are likely to fall drastically in the next year. The adverse publicity could take a long time to reverse. ALthough they have already fallen 33% it looks pretty grim for Northern Rock shareholders

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