Northern Rock Shares Fall

Amid crisis in the financial markets today, Northern Rock are holding their heads above water.


Although shares for Northern Rock plummeted by 23% after emergency funding by the Bank of England, they remain solvent. The Bank of England during their last MPC interest rates meeting mentioned that the state of affairs would be monitored closely for any change.

The trend for Northern Rock does not seem to be changing, ever since the downturn in share price in May 2007. The backlash from the problems in the US means that lenders like Northern Rock get hit hard, as their funding comes largely from borrowing rather than through customer deposit accounts.

Check out the current Northern Rock share price

Talking on BBC Radio 4 this morning Chancellor Alistair Darling said:

"In order to create a stable banking system, the Bank of England steps in and it makes facilities available to the Northern Rock."

"Northern Rock can draw on them when it requires, but it means it can carry on trading, people can use their accounts in the normal way, they carry on making their mortgage payments in the usual way, Northern Rock will be able to carry on its business."

John Evans - Abbey Mortgages said:

"Tuesday was a big make up day for the world funds. I am certain the Northern Rock issue is a short term one. The share prices have fallen, but this may well signal the top in this current run in interest rate rises.

"The authorities aren't doing enough to instil confidence in the market."

The financial markets are in a state at the moment, with share prices falling and interest rates rising, but as John Evans mentioned, a lot of financial institutions have had to make "make up" payments recently. This along with the problems in the US are bound to provide some lenders problems. The financial market has become a major economic entity in the UK over recent years with London now one of the major financial centres in the world. When major financial powers like the US combined with Interest Rate rises there are bound to be problems, but the UK financial market is stable enough for Northern Rock to continue trading even after a 23% share drop. This shows resilience in the UK financial market and the authorities should be instilling confidence in the consumer.

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