You may have seen the news reports of panic at Northern Rock over the weekend and if you are one of Northern Rocks 2 million customers may be very worried! Let MoneyExpert separate the facts from the fiction….
The government has now publicly backed all savings at Northern Rock in a move to stop a run on the bank! So not only are the Financial Services Compensation Scheme covering the majority of the first £35,000 of savings per person but now the government will guarantee them 100% in Northern Rock!
The Financial Services Compensation Scheme (FSCS) guarantees 100% of the first £2,000 and 90% of the next £33,000. So if you had £35,000 in a bank that went bust you would receive £33,170 back.
Previously the Bank of England agreed to effectively fund an overdraft for Northern Rock if they need it. So far Northern Rock has not used the facility. Bear in mind that they took this step to secure their business and safeguard their customers after the US credit crunch reduced their share price and made inter bank borrowing more expensive. The media reporting of it and the pictures of people queuing has caused panic amongst savers and this in turn puts further pressure on Northern Rock.
However, experts say these developments should not be viewed as a crisis move and that all Northern Rock customers should continue as normal. So far the Bank of England, The Financial Services Authority (FSA), the Council of Mortgage Lenders, the British Bankers Association, the HM Treasury, the Treasury select committee and Chancellor Alistair Darling have all agreed that Northern Rock is not in danger of going bust.
If you are concerned, either as a saver or as a mortgage customer, MoneyExpert.com advises you to avoid making quick decisions and to consider your options carefully. Exiting a mortgage early can be expensive. Savings under £35,000 are secure and you can be confident that your mortgage deal is not in jeopardy.
Savers in Northern Rock
As with any savings account if you have savings in Northern Rock they are protected by the financial services compensation scheme. So if the unimaginable happened and they went bust you’d get the full amount back up to £2,000 and then 90% of the next £33,000. So do not panic if you’ve savings under £35,000.
It would be advisable to make sure you have no more than £35,000 in any savings account whatever the bank and we suggest that you pay particular attention to banks in the same group as the £35,000 amount would apply to a banking group.
Northern Rock isn’t one of the top savings deals out there at the moment so if you are determined to move savings accounts make sure you are moving to secure a better rate.
If you have an ISA make sure your new provider organises the account switch or you will lose the tax free element of your savings!
Compare Savings accounts here
Mortgage with Northern Rock
Make sure you continue your mortgage payments as normal and if you have a mortgage deal (fixed rate or discounted rate for instance) remember that during a fixed deal a provider cannot change the rate. If however it is about to end make sure you compare the mortgage market now to ensure you get a good deal.
Click here to compare mortgage quotes now
Remember don’t panic! The Northern Rock website is going to be extremely slow as it is overwhelmed with people visiting it for advice & to check their savings as well as withdrawals. If you need further information, we recommend contacting your local branch.
Click through to MoneyExpert for money saving hints and tips