September 14, 2007 (LPAC)--In a dramatic sign of the collapse of the British real estate bubble, the Bank of England has bailed out Northern Rock, Britain's third largest mortgage lender. This is the first bank bailout undertaken by the Bank of England since 1973.

Although the BoE is claiming it is not a bailout, no one believes it, and "Northern Wreck's" shares collapsed by 24% within minutes of the opening of trading today -- on top of a prior 46% fall -- driving down other bank shares from 2 to 6 percent. The news also drove the pound Sterling down to a 14-month low against the euro. BBC is reporting that customers have been queuing up outside branch offices of the bank's branch offices to withdraw their savings. With 113 Billion pounds ($226 billion) Northern Rock, and 800,000 mortgage holders, it has been at the center of Britain's enormous mortgage bubble.

No one has revealed how much the BoE lent Northern Rock, but Northern Rock said that the BoE will provide it with as much funding "as may be necessary." The credit will be at the so called penalty rate which is one percentage point more than the 5.75 base rate.

Vince Cable of the Liberal Democratic party said, "This is a very serious development indeed and it was entirely predictable since Northern Rock is one of those banks which has been aggressively increasing its market share by offering mortgages at multiples of income well in excess of prudent levels."