Woes! It’ll take ten years to get the Northern Rock money back!
IT will take ten years to get Northern Rock money back. Or, as it should more properly be presented, this is a statement of the bleedin’ obvious:
Taxpayers will have to wait up to a decade to get their money back from the bailout of Northern Rock, according to the man charged with managing the rump of the failed bank.
In an interview with Financial Mail, Richard Banks, chief executive of UK Asset Resolution, said: ‘We expect the majority of the Government debt to be repaid within the next ten years.’
But Banks said he could not be precise about the final date as inflation and the state of the economy could push his forecast off course.
Think for a moment about what is actually happening here.
Northern Rock went bust, oh yes it did. However, when it went bust there were lots of people who had mortgages with the company. Those mortgages don’t disappear because Crock went under. What went under was Crock’s ability to finance those mortgages. And that’s what the government money has been used to do. There’s, ooooh, some £40 billion in mortgages outstanding. And the markets wouldn’t finance them any more. Thus the government aid which does.
And what happens as the years pass? Some people will sell their houses and move. They won’t get another Northern Rock mortgage, obviously. But when they sell up their old one will be paid off: thus the taxpayer gets their money back. Some others will stay put: but they will also pay off their mortgage. Thus the taxpayer gets the dosh back.
Which is why this is all going to take so much time: simply because mortgages last for a long time. The legal limit is usually 30 yearss. But given that some people do move the average is actually about 15 years that they really exist for. So, Crock went bust 5 years ago, in another 10 years….yup, that’s 15,….we’ll get most to all of the money back.
This isn’t actually a surprise. This is, rather, just what everyone expected would happen.
Posted: 8th, April 2013 | In: Money Comment | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink