The long-suffering shareholders of Northern Rock will likely receive a pittance in compensation in the wake of Chancellor Alistair Darling's announcement yesterday that the beleaguered mortgage lender is to be taken into temporary public ownership.

However, these machinations at the UK's biggest casualty of the global credit squeeze will also have implications for borrowers, savers as well as for competition in the mortgage market.

While the first run on a major UK bank in almost a 150 years has undoubtedly given Prime Minister Gordon Brown a few headaches, denting his reputation for financial stability and tarnishing his popularity, it has been more like death by a thousand cuts for its shareholders.

Under the plan, shares of Northern Rock will be suspended on the London Stock Exchange this morning, then acquired by the government.

The share price of the Newcastle-based bank had collapsed to 90p on Friday, compared with a high of 1258p less than a year ago before the credit crunch laid bare its reliance on funding from the money markets.

The level of compensation to Northern Rock shareholders, which analysts expect to be minimal, will now to be determined by an "independent valuer" - although one has yet to be appointed.

Mr Darling yesterday noted: "The legislation will enable the government to acquire the bank's shares and assets.

"It will provide for compensation to be determined by an independent valuer."

He added that the compensation would be calculated assuming that the bank had not been propped up by £25bn in loans from the Bank of England.

However, shareholders could also raise a legal action if they are unhappy with the amount offered. Two hedge funds have reportedly written to the Treasury, calling for 400p a share in compensation.

Meanwhile, Mr Darling also said that "importantly, savers' and depositors' money remains safe and secure" and that the "guarantee arrangements I announced last year remain in place".

The government has already stepped in to guarantee savers' deposits, which it was forced to do to stop the run on the lender - so technically the savers' money may be safer with Northern Rock.

Mr Darling also said that borrowers "will continue to make their payments in the normal way".

Nonetheless, technically, if mortgage payers fall behind on their payments and their homes were to be repossessed, the property would be ultimately owned by the government.