When you consider the current turmoil in the financial markets, the Northern Rock saga and the softening housing market, it is no surprise that many people are starting to ask what would happen if their mortgage provider went out of business. Would they need to sell their home and repay the mortgage? Would they be transferred to another provider? Would their terms change?

These are all sensible questions that any home owner should be asking themselves in the current climate, although things are not as bad as they may seem.  True, we may see more companies get into substantial difficulties over the next few weeks and months, but as an industry the financial sector do pull together in times of trouble. 

Imagine the situation if Northern Rock was to go under over the next few weeks - a situation which could well happen - there are potentially thousands of mortgage holders who would need assistance.  In this situation, there is no way that the banking sector would either (or could afford to) force home owners to repay their mortgages early, causing a major financial crisis and a flood of property onto the market.  In this situation, a company or companies would come forward and transfer the Northern Rock mortgages onto their business books.

There is some debate whether they would actually be able to amend terms in this situation, but they still need to be competitive and any major changes would be unlikely.  While the UK banking sector is one of the most cut throat in the world, they all appreciate that they have a part to play in the well being of the sector.  If one major bank were to fall, without making arrangements for the transfer of viable client business, then the whole sector would be badly effected, not only on a profit level, but on a trust level (which can be more important that the short term profit outlook).

Whether we actually get that far down the line remains to be seen, but the position of Northern Rock is still very precarious.