Interest Rate Roundup

Friday, September 14, 2007

The U.K. ... yes, I said U.K. ... mortgage crisis

Just in case you were thinking the mortgage crisis was "contained" to the U.S., it isn't. This story talks about how the third-largest U.K. lender is seeing a "run on the bank" due to concern about its mortgage exposure and liquidity. The stock plunged as much as 26% today in London trading after news broke that it's receiving emergency funding from the Bank of England. Bloomberg calls it the "biggest bailout of a British lender in 30 years."

Here's an excerpt with more details ...

"Hundreds of Northern Rock Plc customers crowded into branches in London today to pull out their savings after the mortgage-loan provider sought emergency funding from the Bank of England.

"It's scary,'' said Peter Pye, 60, a retired university lecturer standing in a line of about 30 people outside the Moorgate branch in the financial district. "I have my life's savings in Northern Rock.'' He said he would withdraw a "six-figure'' sum and leave 5,000 pounds in the account.

The Bank of England said it will provide emergency cash toNorthern Rock, Britain's third-largest mortgage provider, in the nation's biggest bailout of a financial institution in 30 years. The rising cost of credit left the lender unable to make new loans and stoked concern among customers about their money.

Northern Rock, which has 1.4 million retail depositors and 800,000 mortgage customers, hasn't imposed any special limits on withdrawals, spokesman Don Hunter said. The Newcastle, England-based company traces its roots back to 1850."


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