I have been watching the problems in the financial world with more interest over the past couple of days because I have a mortgage with Northern Rock.The BBC has a good summary of the situation for concerned customers.
I started wondering last night what would happen to my house if the bank did go under. (Highly Unlikely)
Will they have to sell my house to pay off their debts?
Or if the bank stops trading, would I never have to pay my mortgage again.
Well there is mixed news for people with Northern Rock mortgages. It seems our homes would not be repossessed but we would have to carry on paying our mortgages. Our mortgages are probably the strongest assets the bank has.
More disturbing is that the worlds banks are in this mess. A lack of regulation in the US and sharp practice, selling mortgages to America's vulnerable poor, that will never be paid back, has created a mess here in the UK.
A shed load of cash has gone missing and someone is going to have to pay for this.
I am pretty sure that no one is going to be rounding up those ultimately responsible.
2 comments:
How responsable have Northern Rock been in thier lending. According to comments by the Bank of England and others, the mortgages are the assets of Northern Rock, but if the value of the loan is greater than the value of the property where is the asset value. Granted the way they have done the loans look as though they have the asset to cover the debt, but they then do an unsecured loan. If the debtor then applies for an IVA or defaults on the loan they then go for a charging order. So is the unsecured loan really unsecured? I have read that there is a potential legal challange to this practice. If Northern Rock are found to be acting in a way that is unreasonable and unfair to other creditors, where does that leave Northern Rocks asset base.
You are guaranteed 100% of the first £2,000 and 90% of the next £33,000 by the government. Of course if Northern Rock goes bankrupt (a major possibility) you'll be asking for your money back, along with millions of other savers. You won't see a penny for months (or possibly over a year) and will lose the interest you'd have gained if you'd transferred your money on Monday. The price you'll pay is maybe a few tenths of a percent in interest. What price is peace of mind?
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