Homeowners with a Northern Rock mortgage will continue to pay it as normal. Monthly payments and terms and conditions will remain the same, but Northern Rock mortgage holders now owe the taxpayer money rather than the bank. They will find, however, that securing a new deal from Northern Rock is unlikely to be worthwhile, as the bank’s mortgages have become uncompetitive since the crisis began and better rates can be found elsewhere. The number of new mortgages from Northern Rock will be seriously reduced and rates are likely to remain uncompetitive. The Government will seek to avoid being accused of using the benefits of state ownership to beat rival mortgage lenders’ offers. Currently, Northern Rock’s two-year fixed rate mortgage is set at 6.99%, with a £1,995 fee – this compares to Halifax, which is offering a two-year fixed rate at 5.89% with a £999 fee.
Archive for the ‘Banking’ Category
What now for Northern Rock mortgages?
Monday, February 18th, 2008Northern Rock nationalised
Sunday, February 17th, 2008The government decided to nationalise Northern Rock today, abandoning a five-month attempt to find a private sector buyer for the ailing bank. “In the current market conditions we do not believe the two proposals deliver sufficient value for money for the taxpayer,” Finance minister Alistair Darling told a news conference. “So the government has decided to bring forward legislation to bring Northern Rock into a temporary period of public ownership.” The government will put forward legislation on tomorrow to take the bank into public hands — the first major nationalisation in Britain since the 1970s — and trading in Northern Rock shares was suspended.
Cost of world shares turmoil is £2.7 trillion
Thursday, February 14th, 2008Investors are bracing themselves for one of the most difficult years in stock market history after new figures showed more than $5 trillion (£2.7 trillion) was wiped off the value of shares across the globe in January alone. The loss represents one of the worst starts to a year since records began - a stark indication that markets anticipate a global recession that could last for several years. In London, the FTSE 100 lost £77bn in one day alone - 21 January - in frenetic dealing dubbed a second Black Monday after the great crash of 1987. Although shares have since stabilised somewhat, there is still turmoil in the banking and finance sector.
Egg slashes savings rate by 0.5%
Wednesday, February 13th, 2008Following last week’s rate cut by the Bank of England, Egg has slashed the rate on its internet savings account by 0.5% - double the cut in the base rate. Until the end of last year Egg’s Internet Account came with a promise that its before-tax rate would at least match base rate – 5.25% from last week. But now that the guarantee has run out, the bank has taken a heavy hand to the account. Its loyal savers now earn 4% after savings tax (5% before tax) down from 4.4% (5.5%). Customers looking for a higher rate may want to switch to newcomer Kaupthing Edge which has said it will not be reducing the 6.50% it pays to online savers, despite the change to the base rate.
Directory enquiries free but with 20 seconds of ads
Tuesday, February 12th, 2008The launch of the new 0800 100 100 service signals the end of what many have called the rip-off of the 118 system which replaced the old BT 192 number. It will not charge callers from landlines, mobiles or cable networks, will be answered by real people rather than machines, and its operators will be based in UK call centres. It will be sustained through advertising. Callers will be asked to listen to a 20-second advertising pitch before they receive their number. The majority of the advertising will be relevant to the individual query. It could save callers £300 million a year, the amount currently spent on costly 118 calls. There are more than 378m calls to directory enquiries annually with an average cost of 78p.
Mortgage lenders rush to cut rates
Sunday, February 10th, 2008Within hours of the Bank’s announcement at noon, nine of the top ten lenders said they would pass the full quarter-point cut to their borrowers. Only the stricken Northern Rock did not move its rates following the decision to bring down rates from 5.5% to 5.25%. The ‘rush to cut’ follows criticism of banks and building societies for ripping off mortgage holders after the last rate reduction just before Christmas. About 20% of lenders did not pass on the whole of the December decrease to hard-pressed borrowers. The rate cut will help only the minority of borrowers, roughly one in five, who have a mortgage with a variable interest rate. About 50% of homeowners have a fixed-rate loan which will not be affected.
Bank cuts interest rates to 5.25%
Saturday, February 9th, 2008The Bank of England cut interest rates on Thursday by a quarter point to 5.25 percent despite calls for a half-point cut. The widely expected quarter point cut by the Central Bank was modest compared to the recent cuts made by the US Federal Reserve (1.25% points last month alone). The Bank’s move will be welcomed by many mortgage borrowers, but homeowners who do not have a mortgage deal directly linked to the base rate may be disappointed as some lenders have been increasing their own rates in anticipation of a cut. The decision by the Bank of England’s Monetary Policy Committee comes as more evidence emerges of a slowdown in economic growth both in the UK and overseas.
I got carried away, says SocGen’s rogue trader
Saturday, February 9th, 2008The Frenchman accused of being behind a £3.7bn bank fraud admitted on Tuesday: ‘You lose your sense of the sums involved when you are in this kind of work. It’s disembodied. You get a bit carried away.’ While working as a £75,000-a-year trader for Societe Generale, France’s second biggest bank, Jerome Kerviel was gambling up to £37bn - more than his bank’s worth. It is alleged that he circumvented internal controls with stolen computer access codes and fictitious documents. However, he told investigators that the bank must have known what he was doing because of the profits he had generated previously, and suggested his bosses ‘turned a blind eye’ as long as he was not in the red. His losses were revealed by the bank on January 24. He was arrested a few days later but released on bail within 48 hours after being charged with breach of trust, using false documents and unauthorised computer access.
Barclays boss lost out to fraudsters
Tuesday, January 15th, 2008A fraudster posing as chairman of Barclays (Marcus Agius), tricked his own bank’s credit card arm into issuing a new card before taking £10,000 cash from his account. The new card was wrongly issued after a caller gave card operator Barclaycard some of Agius’s personal details, but staff also failed to follow security guidelines in asking for more information. Like any customer, the chairman later had the money refunded to his account. For the past few months, officials have been blamed for several high-profile losses of personal data held by the government, most notably the loss of two discs containing personal details of 25 million Britons; more than a third of the population. Read Martin Lewis’ article on how to protect yourself, what to look out for and what to do if you think your ID has already been stolen.
Bank charges court case opens
Monday, January 14th, 2008The court case into unauthorised bank overdraft charges began today. The Office of Fair Trading has brought the test case to determine whether the penalties, which can cost customers up to £39 a time for exceeding their borrowing limits and for bounced direct debits and cheques, are legal and fair. If the High Court judge agrees with the OFT, this should open the floodgates for compensation on a large scale for victims of unauthorised overdraft charges. On the flip side, the banks may start to charge all customers for everyday banking, for example by levying a monthly fee, to recoup their lost income.
