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Northern Rock Sale: what it means for you

Northern Rock Sale: what it means for you

Category: Banking

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Northern Rock has been sold by the Government to Virgin Money for £747 million. It's only the 'good' part of Northern Rock that's been sold – which includes:
  • The entire branch network (75 branches)
  • All Northern Rock savings and current account customers (with approximately £16 billion deposited)
  • Some loan and mortgage customers (although this is only a fraction of the loan and mortgage lending undertaken by Northern Rock up to 2008 when it was taken over by the Government)
The deal completed on 1 January 2012.

The Government is hanging on to the 'bad' part of the bank (known as Northern Rock Asset Management), where higher risk or badly performing 'toxic' loans and mortgages are held. This accounts for a large part of the lending Northern Rock made prior to 2008.

What about my local branch?

As part of the deal, Virgin Money has had to commit to keeping open and, over time, expanding the total number of branches. They've also guaranteed that there will be no compulsory staff redundancies for at least three years, which would indicate no or minimal branch closures within this timeframe.

Virgin Money intends to re-brand Northern Rock branches throughout 2012 as "stores". Your branch is likely to look a lot different, although the services and staff you're used to will stay the same.

As a Virgin Money customer you'll now also be entitled to deals and discounts within the Virgin group of businesses, as well as from other high street retailers. Find out more information at

The sale of Northern Rock: what it means for you


Your account is now owned by Virgin Money, not Northern Rock. Virgin can not change the terms and conditions of your account without prior notification.

For customers with fixed rate bonds or accounts with fixed bonuses, these will have to be honoured.

Virgin Money and Northern Rock are to keep their separate banking licences in the short term. This means that you can have up to £85,000 (or £170,000 in a joint account) saved with each licence, and have your money fully protected by the Financial Services Compensation Scheme.

All new Virgin Money accounts (from 5.1.12) will actually operate under the Northern Rock licence. However, all Virgin Money savings customers who opened accounts prior to this date will fall under Virgin's banking licence not Northern Rock's.

In the longer term it is likely that the banking licences are brought together as the banks become one. You'll be informed nearer the time, but it's best to be aware of this, to make sure you don't exceed depositor protection limits later on.

Mortgage Holders

(and loan borrowers)

Are you a customer of Northern Rock plc, or Northern Rock Asset Management?
A lot of mortgage and loan customers have been segregated to Northern Rock Asset Management. This bank was not sold to Virgin Money.

If you are in any doubt, check whether you are a customer of Northern Rock, or Northern Rock Asset Management.

Northern Rock Plc. customers
Mortgage and loan customers on introductory fixed or tracker rates will have these deals honoured. Other terms and conditions will not be changed without prior notification.

However, your mortgage may well be subject to a different interest rate when you end your introductory fixed or tracker rate deal.


When Northern Rock was independently valued in 2009, it was found that the shares held were worth nothing. This remains the case.

The purpose of this sale is to recoup some of the Government's direct investment in the bank since it nearly failed in 2007.


As taxpayers we're going to make a 'small' loss on the sale of Northern Rock. The bank was bought for £747 million – substantially less than the £1.4 billion we originally took.

In addition to the £747 million, Virgin Money will pay an extra £50 million within six months of taking over, with a further £150 million being paid as a Capital Instrument (bonds or shares) later on.

If Northern Rock is floated on the stock exchange, or sold for a profit within the next five years, Virgin Money will pay the Government a further £50-80 million.

In total though, even with these future payments, the Government will not get back what it put into the Rock.

How competitive will Virgin Money be?

As of now Northern Rock is reasonably competitive for savings, less so for mortgages. The noises being made by Virgin are that they want an enlarged Virgin Money to compete on the high street, and the early signs are encouraging.

Virgin Money has recently launched a reasonably priced cash ISA and easy access account (both priced at 2.85% AER). Both accounts immediately hit our best buys.

There are also plans afoot to offer bank accounts sometime in 2013. After this, there is also the intention to offer business banking, but as yet there is no timeframe on when this service will be available.

What next?

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.