The Northern Rock and Bradford & Bingley ”bad banks” have paid back a further £1.9bn to taxpayers this year as profits rise on the back of improved mortgage arrears.
Results for UK Asset Resolution, which manages the stakes, show it has repaid £1.3bn worth of Government loans in the six months to 30 June compared to £800m in the same period last year, plus nearly £600m in interest payments, tax and fees.
It results show borrowers in three months mortgage arrears or more have reduced by 29 per cent to 21,332, or 3.7 per cent of the total, compared to 30,222 in the same period last year.
Pre-tax profits have also grown 10 per cent to £529m this year, compared to £481.4m in the same period last year.
UKAR says a “modest” recovery in the economy and house prices means it expects its arrears to continue to fall this year.
The bad bank was set up to wind down toxic loans in the failed lenders as the “good bank” part of Northern Rock was sold to Virgin Money for £747m earlier this year.
Since its creation in October 2010 UKAR has repaid £6.6bn of Government funding with £3.1bn repaid in 2012.
The Government body says repayments this year have been funded largely from a 3.8 per cent reduction in lending balances. The rest of the money come from “proactive arrears management” and low interest rates.
There were £2bn worth of secured residential redemptions, £100m worth of unsecured redemptions, £100m of commercial redemptions and £400m of regular repayments.
As at 30 June, lending balances stand at £66.1bn, compared to £68.7bn at the end of 2012. In total, the balance sheet has reduced from £110.9bn at the end of 2010 to £82.8bn in the first half of 2013.
Northern Rock Asset Management also sold its personal loan book for £400m in June which will go towards repaying Government loans.
UKAR chief executive Richard Banks says: “UKAR has continued to make good progress in the first half of this year, with payments of £1.9bn made to taxpayers.
“It is also pleasing to see the continued reduction in arrears due to the dedication and professionalism of colleagues proactively working with our customers to help them achieve the right outcomes.”