Northern Rock: Our Reaction
Posted by: Philippa Gee
September 14th, 2007.
With the over exposure to mortgages, Northern Rock was a likely contender to suffer most from the recent and well publicised ‘credit crunch’, indeed there had been rumblings for some time that the Bank of England would have to step in, which they have now done. In many respects this should not be turned into a major issue, as it shows that the financial system works well. What it does highlight is that a bank or building society is not a 100% rock solid investment and the need to shop around, before making any financial decisions, is essential.
We do not see significant problems ahead, indeed certain fund managers we have talked to today have confirmed that they feel that Northern Rock may well start to look attractive as an investment again, which is a positive sign.
If you have borrowed money with Northern Rock
It should be business as usual, although if your deal has come to an end, it is worth looking at the whole market to see whether you can get a better deal elsewhere. Northern Rock will have two options; either to offer incredibly good value deals to attract more money, or to start loading the deals they have to make more profit on loyal clients. It will be interesting to see which route they take.
If you have saved money with Northern Rock
It depends on what you are invested in. If the money is accessible then look at what deal you are getting as I do not believe that they offer the best rates at the moment and therefore irrespective of the current financing issue, it is sensible for customers to consider what they can get elsewhere. If you are locked in then I would not waste time worrying and do not see problems ahead. Have some faith in our UK financial systems and just wait for it to settle down.
For investors in general
If you are watching the stockmarket today and wondering what will happen next, be reassured. I feel that this could help to push the market to the end of the correction and that buying opportunities will emerge shortly. Indeed, the reaction to the events at Northern Rock could help to fast forward us to a more positive investment climate.
We will keep monitoring the situation.
Update on 18th September 2007: As the Northern Rock situation has now changed, please read our latest updates from 17th and 18th September.
This entry was posted on Friday, September 14th, 2007 at 10:54 am and is filed under Investments, Mortgages.
Listen to this article as a podcast