The rates are great but the future isn't Rock-solid

Some of the best deals around are now backed by government ownership. Experts warn, though, that they may not last. By James Moore

A key message to come out of last week's nationalisation of Northern Rock is that it could be very good news for savers.

The theory goes that Northern Rock, desperate to attract customers to rebalance its finances, can dangle great deals that now have the added attraction of being backed up by government ownership.

No wonder there have been rumblings of discontent from rival banks, which fear savers will rush to invest with a "gilt-edged" bank.

There are certainly some juicy deals. Two of Northern Rock's savings products – a one-year fixed-rate individual savings account (requiring a minimum deposit of £500) and an over-50s online account – are among the best available anywhere and many of its other accounts are highly competitive.

"There are some very impressive rates from the Rock. Ever since the crisis in September, it has been trying to get into the 'best buy' tables," says Julia Harris from the comparison service Moneyfacts.

But experts warn that there could be a sting in the tail. They fear that the bank's current strategy of reducing its mortgage business – to free up funds to meet its debt to the Treasury – by offering poor deals will lead to an exodus of the least risky borrowers. The bank would then be left with only those customers whom other lenders won't touch.

"It could start to look like a company offering redundancies," says Ray Boulger at mortgage broker John Charcol. "The best people, who can get new jobs, leave and the people who can't move on stay put."

That could threaten Northern Rock's financial stability and it is significant that credit agency Moody's rates the bank's creditworthiness for depositors at two levels below government debt. In other words, money deposited with Northern Rock is not considered as safe as cash invested in government bonds.

Moody's admits nationali- sation will "provide greater security" for depositors but says "any significant improvement in the intrinsic strength of the bank is likely to be a slow process". It also points to "the uncertainty around the government guarantee".

And that is why savers keen to take advantage of good deals offered by the Rock need to keep an eye on developments.

"The structure of the bank is changing and who knows what its approach to savers will be a year or two down the line," says Ms Harris. "It wouldn't be wise for people to sink all their money into Rock accounts."

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Call Centre Debt Collector - Multiple Roles

    £21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

    Guru Careers: Financial Director / FD / Senior Finance Manager

    Up to 70k DOE: Guru Careers: We are seeking an experienced Financial Director ...

    Recruitment Genius: Junior / Apprentice Sales Executives - OTE £50,000

    £11000 - £50000 per annum: Recruitment Genius: This financial company offer ma...

    SThree: Recruitment Consultant

    competitive + incentives + uncapped comms: SThree: Did you know? 98% of our di...

    Day In a Page

    Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

    US betrayal of old ally brings limited reward

    Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
    VIPs gather for opening of second Suez Canal - but doubts linger over security

    'A gift from Egypt to the rest of the world'

    VIPs gather for opening of second Suez Canal - but is it really needed?
    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
    The male menopause and intimations of mortality

    Aches, pains and an inkling of mortality

    So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
    Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

    'How can I possibly be on the list with these writers I have idolised?'

    Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
    Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

    Bettany Hughes interview

    The historian on how Socrates would have solved Greece's problems
    Art of the state: Pyongyang propaganda posters to be exhibited in China

    Art of the state

    Pyongyang propaganda posters to be exhibited in China
    Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

    Vegetarian food gets a makeover

    Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks
    The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

    The haunting of Shirley Jackson

    Was the gothic author's life really as bleak as her fiction?
    Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

    Bill Granger's seaside-inspired recipes

    These dishes are so easy to make, our chef is almost embarrassed to call them recipes
    Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

    Tourists are limp, leaderless and distinctly UnAustralian

    A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
    Blairites be warned, this could be the moment Labour turns into Syriza

    Andrew Grice: Inside Westminster

    Blairites be warned, this could be the moment Labour turns into Syriza
    HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

    The mystery of Britain's worst naval disaster is finally solved - 271 years later

    Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
    Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

    'I saw people so injured you couldn't tell if they were dead or alive'

    Nagasaki survivors on why Japan must not abandon its post-war pacifism
    Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

    The voter Obama tried hardest to keep onside

    Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen