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Are you a Northern Rock borrower?

Mortgage Solutions
Written By:
Mortgage Solutions
Posted:
Updated:
18/09/2007

Over the past few days we’ve heard a lot about anxious people with savings in Northern Rock. But what if it’s the other way around? What if you owe them money or think you may do in the near future? Reuben Bard-Rosenberg addresses the issues for mortgage borrowers.

What will happen to Northern Rock?

The Bank of England’s extension of considerable funding to Northern Rock has ensured that it can keep trading. But the likelihood is that it will be taken over by another bank, possibly as early as this week, maybe in the next couple of months. Lloyds TSB, Barclays and RBS are all rumoured to be interested.

Does this mean I won’t have to pay off my mortgage?

Unfortunately this is not a possibility. If Northern Rock is bought up by another bank, you will then owe money to them. If Northern Rock does go bust, it would go into administration. The administrator would tell you to keep up your mortgage repayments and your mortgage would probably be sold to another mortgage company, who you would then owe the money to.

Will I now have to pay a higher rate of interest?

If you already have a mortgage with Northern Rock, the conditions of your mortgage should be honoured by any buyer, administrator or lender that takes on its business. So if you are on a fixed rate, for example, that rate will remain in place until the end of the period you have signed up for. If you are in the process of applying for a mortgage, you should be aware that Northern Rock still offers competitive rates. This said, there may be delays in your mortgage deal coming through given the problems the bank is experiencing.

What if I want to buy a house in the future?

The problems at Northern Rock stem from the fact that investors are increasingly unwilling to lend money to mortgage providers As a result mortgage providers are now needing to pay higher rates of interest to get investors to part with their money – and this is likely to feed through to the consumer. In other words the interest rates offered on mortgages are probably going to rise, across the market. There have already been small rises in the tracker rates offered by the Bank of Scotland, Halifax , Abbey, BM Solutions and Standard Life.

Related news:

  • 4th Oct 2007 – Northern Rock scraps two thirds of its mortgages
  • 24th Sept 2007 – Northern Rock – business as usual
  • 20th Sept 2007 – Northern Rock shares plummet further
  • 20th Sept 2007 – Bank of England faces grilling
  • 20th Sept 2007 – Abbey launches 100+ mortgages
  • 19th Sept 2007 – Northern Rock could be broken up
  • 18th Sept 2007 – Are you a Northern Rock borrower?
  • 18th Sept 2007 – Where next for Northern Rock?
  • 14th Sept 2007 – US sub-prime crisis hits UK mortgage lender, Northern Rock

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