Tuesday, Feb 17, 2009
Using NR to kick-start the housing market
Telegraph: Northern Rock: one year on hard decisions still remain
The Government is almost certain to decide that Northern Rock should restart mortgage lending – providing homeowners with the credit other banks are reluctant to offer. To do so on a large enough scale, billions of pounds more taxpayer money will have to be pledged.
In the past year, Northern Rock has successfully reduced the Bank of England's £24bn loan to £11bn – by attracting customer deposits and aggressively chasing mortgage redemptions. Now instead, the loan will start growing again.
Northern Rock accounted for one in every ten repossessions last year and almost a fifth of its mortgage book is thought to be in negative equity.
Posted by little professor @ 09:00 AM (355 views) Add Comment
4 Comments
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1. paul said...
It is breathtaking how quickly the government has changed the rules they put in place around the nationalisation of Northern Crock to allow themselves to directly intervene to get house prices rising again.
I'm disappointed that Europe has not yet called 'foul' on the government's little scheme to get taxpayers to enrich the property owning baby-boomer generation, although I am still optimistic that Europe will block it.
2. mark wadsworth said...
It took me a couple of weeks to work out what to do with the Northern Rock when it went *pop* back in September 2007, and after actually having looked at its balance sheet (unlike most other commentators) I came up with this.
I see no reason to change my mind now, not in respect of NR or any other bank. But the banks have bluffed the government into thinking that they are too big to fail. They are NOT, not now, not ever (see worked example in the comments re RBS - worst case, 'other' creditors would get repaid 98.7p in the £1).
3. Loaded And Waiting said...
Who are Northern Crock going to lend to? All the top-rated borrowers are being cherry-picked by the private sector banks. If Crock go after the same low-risk borrowers they'll simply crowd out the other banks, which will reduce their lending by the same amount rather than take on more risk.
The alternative, of course, is for the taxpayer to take on all the garbage the other banks don't want.....
4. a saver said...
Again, I wonder why there aren't riots in the streets at this monumentally risky and morally hazardous plan. Are they putting something in the drinking water? Just as the nationalisation of the Crock starts to look like it might be working out in part, due to a massive taxpayer cash injection plus unfair advantage versus other banks with 100% deposit guarantee, GB proposes to put it in total jeopardy. Don't we need to wind down the amount owed to British banks instead of decreasing it?