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Northern Rock 100% guarantee runs out

Thousands of savers with nationalised bank Northern Rock have lost the 100% Government guarantee on their deposits.

As of 5pm yesterday, customers with variable rate accounts no longer had all of their money guaranteed by the Government, but will instead be protected up to the £50,000 limit under the Financial Services Compensation Scheme.

People with fixed-rate deposits will continue to benefit from the unlimited guarantee until their product matures, as long as they invested the money before February 24, when the Government announced plans to remove the guarantee.

Northern Rock would not be drawn on whether it had seen large-scale withdrawals ahead of the loss of the guarantee, saying only that "customer reaction has been as expected".

However, it is thought consumers who had high levels of funds held with the bank have withdrawn their money.

A Northern Rock spokesman said: "The removal of the guarantee is another positive step for Northern Rock and reflects our strong capital and funding position. We are returning to a level playing field."

The group has launched a number of savings products in recent weeks to remain competitive once it loses its Government guarantee.

These include a regular saver paying interest of 5%, the highest rate on offer that is not linked to a current account, as well as a best-buy children's saver paying 3%, and a stepped fixed-rate bond offering returns of up to 5.5%.

Michelle Slade of Moneyfacts.co.uk, said: "A lot of people did move to Northern Rock, even to their uncompetitive products, because of the protection.

"It could now be that people who moved to it for that reason, look to get better rates elsewhere."