Northan rock hits spain

Last month I wrote about the seemingly out of the ordinary situation whereby banks were not supporting each other though the inter bank lending protocols LIBOR and EURIBOR.  Indeed Barclays had been in a very tight situation twice during August, so much so, that the Bank of England had to come to its rescue.  The effects then stretched during September to Northern Rock.  This time the Bank of England stood back until the bitter end not only putting savers through a great deal of soul searching stress and the withdrawal of millions of pounds.  That late support from B of E continued onward and now we can feel the result of the debacle her in Spain.    

As one of the big five Barclays weathered the August rumour and intrigue saying it was sufficiently well placed for the future.  The media seemed to agree and the story soon became a second division story with little further footage. 

September dawned and Northern Rock was not so lucky.  Its moment of need came after the end of the school summer holidays.  The refreshed city pundits looking for something to dig their teeth into saw a juicy target that was without the gravitas of Barclays.  Indeed some could say that Northern Rock was just a middle class company trying to move into upper class trading. 

For Northern Rock savers are ordinary folk who found a company that was good for mortgages and reasonable for saving.  Ordinary folk tend to stay loyal so long as there is not too much difference in the return on investment.  But as soon as the news headlines warned of too much sub prime lending, investors had to look to their own savings as memories of BCCI and Gleeson came rushing to the fore.

For us in Spain the impact was more subtle.  At the beginning of September the euro rate was around 1.47 to the pound by the time we got to the end of the month and after the media and political frenzy had subsided the pound had weakened to only 1.41 euro.  If you look at it in real terms at the beginning of month £1000 would have produced 1470 euros as opposed to only 1410 by the end of September. A loss of 60 euros in a matter of three weeks. 

This weakness in the pound not only affects those wanting to transfer large sums of money it also and perhaps more significantly affects those who are dependant on monthly pension payments.  The good thing is that exchange rates go up as well as down and for those of you who do not have the cushion of yearly contracts for pension exchanges with a fixed rate then the only to do is batten down the hatches and wait.

Although Northern Rock has blundered and been somewhat greedy they are not alone. Some of the European lenders have also been relaxed in lending criteria.  This means that things will get tougher for those looking to borrow; both here and in the UK.  Mortgage lenders and loan companies will want more supporting information proving that you can afford the payments.  That may not be such a bad thing, for those expats who want to work here and bring up a family it is better to realise that life in any country is relative.  Your income over outgoings must always provide an element of flexibility when looking to borrow.  If not; any unforeseen circumstances (and they are always happening) will lead to debt. 

Life style and quality can be much better here, but Spain is not immune to market forces and the sell, sell, sell of the must have it now culture.  Personal debt levels in Spain are rising as young people in particular want to keep pace with each other in technology, style and leisure spending.  That said debt and getting out of it is the same what ever country you live in.  It’s hard, long and very depressing.  Best not to go there in the first place.

Those pundits who decided to attack Northern Rock have a lot to answer for.  Let’s hope there names crop up on the next hit list for scrutiny within the halls of H.M. Revenue and Customs (the taxman to you and me).

For assistance with tax, mortgages, currency transfers and financial support information contact Ann on 661003324, email This email address is being protected from spambots. You need JavaScript enabled to view it. or This email address is being protected from spambots. You need JavaScript enabled to view it..

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