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Saturday, September 15, 2007

Northern Rock

In scenes reminiscent of "It's a Wonderful Life" Northern Rock experienced a good old fashioned run on the bank yesterday, as customers queued to withdraw their money.

About £1BN, 4-5% of retail deposits, was withdrawn on Friday; it is claimed that there are queues forming today as well.

As ever, with matters of finance, the hapless citizens of Britain have got hold of the wrong end of the stick. There is precious little likelihood of their savings in Northern Rock disappearing, as the bank is not about to go bust.

The danger in fact is posed to those who wish to borrow money for a mortgage. Northern Rock and other lenders simply do not have the liquidity to lend money on the scale that they were doing before.

The result?

Falling house prices.

That's where the danger lies!

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