Government guarantee

By THIS IS MONEY
Updated:

 

The Daily Mail City team looks at the guarantee the government put on all savings accounts with Northern Rock, as it went into meltdown.

Sounds reassuring.

That was the intention. At the height of the Northern Rock crisis in 2007, the government put a safety net under all savings accounts in the Geordie mortgage giant.

The aim was to shore up confidence and stop the damaging run on the lender.

Did it work?

To a limited extent, yes. It wasn't enough to avert nationalisation, but with the guarantee in place, savers no longer queued up to withdraw money.

Indeed, as the financial storm escalated through 2008, the Rock became a safe haven for consumers worried about investing their cash.

Why?

Normally only the first £50,000 of a saver's deposit is guaranteed if a UK bank goes bust. For the Rock there was no such ceiling.

So what?

The government is expected to call a halt to the unprecedented support by the end of the month. Ninety days after that the unlimited warranty will be lifted.

What then?

Rock customers with variable savings accounts have the same guarantee as with other banks and building societies - £50,000 for an individual or £100,000 for a couple. Those with long-term, fixed-rate deals, such as three-year savings bonds, will enjoy open-ended taxpayer support for the lifetime of the product.

Most watched Money videos