Northern Rock Nationalised – Good News for Anyone with a UK Mortgage?

Northern Rock loan approved

There has been plenty written over the past few weeks and months about the situation at Northern Rock. I - like everybody else - was surprised at how the British Government managed to make a pig’s ear out of what started out as a simple request for temporary funding, which was approved by the Bank of England.

Media interference brings everything tumbling down

Television, radio and the press all jumped on the Northern Rock story and helped to cause what was in all but name, a run on the bank. I remember listening to the BBC’s Radio 5 Live breakfast program when they posed the question - ‘should you or shouldn’t you withdraw your savings?’ The mere suggestion that anyone with savings in Northern Rock should consider withdrawing their money would probably mean - they should. And guess what? They did! A shame really - because it looked like Northern Rock had it all under control.

Isn’t it good to own a bank?

The good old British tax payer is now the proud owner of a bank, since the Northern Rock is now national property. Isn’t this good news for anybody who has a mortgage? David Smith commented in The Sunday Times that the Council of Mortgage Lenders (CML) has done some calculations that predict a shock for borrowers as they move out of the deal period of their current mortgage and are offered much less favorable terms by their current lender for a new deal.

Better mortgage deals for all

The Government can protect borrowers from greedy mortgage lenders by ensuring the Northern Rock continues to offer competitive mortgage deals. Normal market forces will then ensure that other lenders will have to follow suit. Although I am not a fan of nationalization, and on the face of it I don’t understand why the government would want to own a bank, I can see that the situation could prove advantageous in steadying inflation. After all, a mortgage is most people’s largest financial commitment.