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Finance

Northern Rock shuts doors to new savers

02/10/2008

Northern Rock has been forced to close some savings account offers as it experiences the opposite of a run, with customers flooding the bank with deposits.

Customers at the nationalised bank have 100 per cent savings guarantee - put in place by the government after the bank faced a run a year ago.

In the current banking uncertainty - with institutions across the world closing and the UK nationalisation of Bradford & Bingley and merger of HBOS and Lloyds TSB - savers than once fled the Rock now see it as a safe haven.

The bank reports "a significant inflow of retail deposits particularly in recent days" although it is unwilling to put an exact figure on the total.

In June the bank had deposits of £14.2 billion.

The move has been made because Northern Rock is not allowed to exceed 1.5 per cent of the UK retail deposit market - so it does not have a competitive advantage through being nationalised.

Simon Hall, spokesperson for Northern Rock, explained the was heading towards the 1.5 per cent threshold but was below it.

"We are keen not to close out doors to new customers," he said.

"But we need to stick to the 1.5 per cent level."

Products that will be closed to new customers include its Silver Savings accounts and a number of fixed-rate bonds.

Recently the bank also withdrew its Fixed-Rate Access Bond and the online E-Saver products.

Mr Hall explained the removal of these deals had affected demand for new accounts, but the recent market turbulence and external factors also had a strong effect on demand.

Existing customers can continue to use their accounts and a range of accounts for new customers at lower rates remain, including fixed rate ISAs at six per cent AER, the Brach Saver Account at 4.90 per cent AER and its Save Direct Base Rate Tracker at 3.45 per cent AER.