Northern Rock latest to go to Bank of England for loan

One of the UK's largest mortgage lenders, the Northern
Rock, is applying to the Bank of England for emergency financial support.

The decision for the Bank of England to become the
“lender of last resort” is extremely rare, and follows only a week
after it was disclosed that Barclays
had needed 2 emergency loans of £314m then £1.6bn, that Deutsche
has shut down its proprietary credit trading desk in London and the
collapse of Victoria
earlier this week.

Following the widespread losses made by investors in loans
to US homebuyers with poor credit history, the so-called sub-prime loans,
investors have become wary of buying all mortgage debt, including Northern

All banks are having greater difficulties than normal
getting funding from the market but as a specialist mortgage lender, no-one
really wants to lend to Northern Rock.

In the first six months of the year, Northern Rock made
pre-tax profits of just under £300m, barely changed from the previous year, however
it massively increased its share of the mortgage market, taking 18.9% of all
net mortgage lending in the UK
against its previous peak of 14.5%, seen in the second half of 2006.

The firm's shares have almost halved in value this year and
talk that it may be in further trouble left it as the biggest loser on the FTSE
100 on Thursday, closing down 4.9%.

Northern Rock has loans and other assets on its balance
sheet of £113bn. The value of deposits placed with it by retail customers is

Mainstream mortgage lenders Northern Rock and
Alliance & Leicester both originate subprime loans for Lehman
Brothers . The banks, for whom “non conforming” loans
represent just a fraction of overall mortgage business, say they are still
originating new business for Lehman.


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About IanPJ

Ian Parker-Joseph, former Leader of the Libertarian Party UK, who currently heads PDPS Internet Hosting and the Personal Deed Poll Services company, has been an IT industry professional for over 20 years, providing Business Consulting, Programme and Project Management, specialising in the recovery of Projects that have failed in a process driven world. Ian’s experience is not limited to the UK, and he has successfully delivered projects in the Middle East, Africa, US, Russia, Poland, France and Germany. Working within different cultures, Ian has occupied high profile roles within multi-nationals such as Nortel and Cable & Wireless. These experiences have given Ian an excellent insight into world events, and the way that they can shape our own national future. His extensive overseas experiences have made him all too aware of how the UK interacts with its near neighbours, its place in the Commonwealth, and how our nation fits into the wider world. He is determined to rebuild many of the friendships and commercial relationships with other nations that have been sadly neglected over the years, and would like to see greater energy and food security in these countries, for the benefit of all. Ian is a vocal advocate of small government, individual freedom, low taxation and a minimum of regulation. Ian believes deeply and passionately in freedom and independence in all areas of life, and is now bringing his professional experiences to bear in the world of politics.
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