It is 6.9% interest annual and the rate is guaranteed until Jan 2008. You can withdraw whenever you like, no charge. You can put in money when you like as long as the bond is still open to new customers.

So it is called a bond but appears to be like any ordinary saving account? Am I missing something?

It's fantasy made up shit?

Presumably calling it a bond is being used to advertise its fixed rate status.

Similar products (where withdrawals are allowed withing the term of the product) tend to have either a notification period (say 90 days) and or a reduction in the interest rate if you withdraw before the end of term. ICICI have one where they reduce the rate to 5.75% I think from just over 6%.

You need to get hold of the terms and read the whole lot.

Just been announced. It is on their website?

Am I missing something?

Will this now force others to up their savings rates?

Is it cast iron government guaranteed?

No notice, no drop in IR, no charges for withdrawals. Min withdrawal is £250.

http://www.northernrock.co.uk/downloads/tandc_frab.pdf

Two drawbacks:

They state it could take a number of weeks to open.

You can only get money out via cheque, CHAPs (there is a charge) or transfer to another NR account.

Skim reading the Ts & Cs, the only downside I can see is withdrawals must be made by cheque, CHAPS or into another NR account.

Otherwise worth a punt IF the govt are backing it 100%.

Do NR have an e-account? Transfer to e-account, then transfer to (other) bank account.

It would be useful to know the status of NR. I tend to think that the higher the IR, the greater the risk. This looks a very good deal, and NR on its own is high risk, but NR plus government is surely low risk. They can't now let this one go, can they?


Peter.

According to an article on moneysavingexpert the Government is backing all savings in the NR 100% even above the 35K limit to current and new depositors.

I think it is odd. 6.9% seems far too high for a 'cast-iron' bond... though, I suppose, it isn't tax free... that must make a difference when comparing it with the likes of NS&I.

Conversely, it is cheekily low if this is lending to Northern Rock.

The guarantee would need to be explicit and in writing on a document other than the ones issued by Northern Rock.

Yes, however, that backing could be withdrawn while the bank is closed overnight.
I'm not saying that it will be - just that it could.

Do you really think that the government could get away with doing that? We're backing this 100%...oh no we're not. I wonder if one could write to someone in government, perhaps to our darling there, and find out what the answer is?


Peter.

Appears to be a savings account with a nice 6.7% or 6.95 rate for 12 months. Nothing better on the market.

We must be. The FT said last week that the average yield on NR's 25 billion mortgage portfolio was around 6%

So they're going to pay 6.9% plus something to compensate the government for the bond insurance (after the EU orders it). Call that somewhere between 1% and 2% (which is generous given NR's dodgy finances).

This means that NR would have to shell out about 1.5 billion per annum in losses just on that 25 billion, never mind whatever interest they've racked up at penalty rates in the meantime at the BofE.

Remember the adage "When in a hole, stop digging"? Brown and Darling are in a very deep hole and going at it like steam shovels.

Still, why should they care? It's our money.

In the immediate aftermath of the run on Northern Rock, Darling spoke live on the BBC... he said that Northern Rock customers' money was safe and that they shouldn't panic. He also said that depositors at other banks would be underwritten up-to £100K and not £35K as was the then limit. That was on a Thursday (or maybe Friday). On Monday Brown has made a U-turn on the £100K and stated that only £35K (but 100% thereof) would be underwritten. I can't trust people who go back on their word.

I doubt that the government would back-out in an obvious way. They might amend the deal to include some exclusions... or they may sell the underwriting contract to a shell company that is bought a few months later by Northern Rock. The number of ways that the underwriting could be subverted are endless - in principle.

Has anybody seen this purported guarantee in writing?

Guranteed till Jan 2008, thats about 8 days- I suppose thats about right

My typo - should be Jan 09

Just got back from the local NR branch. Account now open with £1, really easy.

I'll investigate a bit more before transferring any more money in, but the said it may not be available for long so I'll have to make my mind up pretty quickly.

They assured me that it is guaranteed by HMG/FSA, but had nothing in writing to prove this. Apparently, HMG/FSA have to give three months notice if they wish to revoke the guarantee, so there's plenty of time to get the money out if that's what they decide.

Do you mean that however much you put in (is there a limit?) HMG/FSA are guaranteeing it? or is it the usual 35K thing?


Peter.

Edit: '?' added.

All of it, I believe.

This cant be THE bonds, the government havent made the decision yet.

yes, this is on their website:




And 3 months notice on that guarantee. Well!


Peter.

The real beauty is that it's a sort of one sided bond. They are committed to pay 6.9% until 20/1/09, but you can draw the money out at any time without loss of interest or penalty, so if rates go up you just draw out the money and invest elsewhere.

Will this cause a reverse run on Northern Rock - people will be queing up to put their money in.

Surely this will have a bad effect on other banks as their savers leave for NR.



This will surely raise new questions and create many more problems for all other UK banks.

This is simply bonkers. I actually get more if I keep my house fund in their bond than I pay out in rent - as a top taxpayer.

It's no longer the case that it costs less to rent than to take out an Interest Only mortgage, it costs less to rent than buying your house in cash.

I guess since A&L pulled their 7.0% bond earlier this week (see thread) this is the best out there. I was too slow and missed it.

Looks like they are testing the NRK brand. Their savings accounts are 100% backed by UK government (at the moment), so it's equivalent to NS&I.

No way would they be allowed to issue a savings account without permission from the treasury etc as they are probably near to the top of the tree with this one. It would signal an unfair advantage over the NRK's rivals.

If savers rush to open these accounts and let's face it, the rate is very attractive, then that gives the green light to Branson and others including NRK management that all is well with the brand!

Or am I on the wrong track?

I think you are spot on - this rate will have people flooding back to NR in the current climate and that will make it more attractive to buyers of the company as a whole or of the corporate bonds. Problem is, will it force other banks to up their rates and offer a bond on the same terms? That would be a WOW for British banking in the current climate.

I was reading on moneysavingexpert that all money in the NR, regardless of it being over the FSA 35K limit, is guaranteed by the Government? Anyone thinking of putting more than 35K in there?

Is the 100% guarantee a 100% of say 100K or is it really saying "We 100% guarantee the 35K FSA limit"?

Appears the Government are guaranteeing you regardless of the amount

http://companyinfo.northernrock.co.uk/corp...onsAnswered.asp

Having just spoken with a friend at NR it appears that the fly in the ointment is that money can only be paid into the account while the offer is still open. At some point the offer will be withdrawn and you will no-longer be able to add further funds to the account.

One other issue, albeit minor, is that if you require monthly interest payments they cannot be paid directly into this bond. They must be paid into another account, NR or external. This is obviously done intentionally with a view to the above.

Interesting, I can find various references to the Government backed guarantee and the fact that it is now extended to new savers but... Nowhere can I find the original statement from the Treasury laying out the actual terms of their guarantee.

There's a link from the NR savings webpage to:

http://www.hm-treasury.gov.uk/newsroom_and...ress_104_07.cfm


Peter.

Extracted from that website:


But no link to the wording of the original guarantee.

This seems to be the latest version of the guarantee, any comments?

http://www.hm-treasury.gov.uk/newsroom_and...ress_149_07.cfm

These are the ones to which the above document refers.

http://www.hm-treasury.gov.uk/newsroom_and...ress_104_07.cfm
http://www.hm-treasury.gov.uk/newsroom_and...press_96_07.cfm
http://www.hm-treasury.gov.uk/newsroom_and...hernrock_07.cfm

The first link does include the 3 months + change of notice clause:



Given all the effort that the government are going to to try to resurrect this dead horse, I can't really see them doing anything funny, except in the direst emergency, when you would have lost your deposits in other institutions anyway.


Peter.

Yeah, the guarantee seems pretty watertight, so it looks as safe as NS&I or Treasury bonds and probably safer than any other bank.

A little bird just told me that the 6.9% bond is likely to be withdrawn very soon.

Now withdrawn.

http://www.northernrock.co.uk/savings/fixe...e-access-bonds/

So, sent off my application form yesterday and already Northern Rock have been on the phone. Wanted to put over £230k with them as they gaurentee 100% of your money back. So is anyone else nervous about this? What happens is the house of Lords throw out the Governments proposal to nationalise NR? If they make NR sell or windup what happens to people who have money in bonds and savings accounts with them?

On NR site they state the following:

The Bank of England and HM Treasury have guaranteed:

* All accounts existing at midnight on Wednesday 19 September, including new deposits made into those existing accounts.
* All new retail deposits made after Wednesday 19 September, including new deposits made into those accounts.
* All future interest payments and movement of funds between accounts.
* All term deposits for the duration of their term.

These new agreed arrangements protect all savers in all accounts, regardless of the amount deposited and apply to all existing and new accounts.


But on the treasury site they say different:

Since it would otherwise be unfair to other banks and building societies, the arrangements would not cover any new accounts set up after 19 September, other than re-opened accounts as set out above.

In the case of wholesale market funding for Northern Rock plc, the Treasury confirmed that the arrangements would cover:

* existing and renewed wholesale deposits; and
* existing and renewed wholesale borrowing which is not collateralised.


So who do you believe? NR say they are covered but the Treasury say that new accounts aren't covered.

I think that is something to call to the attention of a few financial journalists - seems HM Government is backtracking. Can't trust the buggers.

Do you have the links for that info - think I will email them to the Daily Mail financial's journos. If the Government is backtracking this would be quite a stink.

You are quoting from the 20th September 07 Treasury press release. they have extended the guarantees since then.






Links to the relevant Treasury press releases are listed in my post #38 on this thread.