Treasury offloads £13bn Northern Rock mortgage book

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The Treasury has announced a £13bn deal to sell a book of Northern Rock mortgages to US investment firm Cerberus Capital Management.

The agreement to sell the mortgages, announced by UK Asset Resolution, means the Government has now disposed of over 85 per cent of the assets of Northern Rock.

All proceeds from the sale will be used to pay down the national debt. The Government has now raised over £24bn through the sale of publicly-owned corporate and financial assets since April.

The sale brings to an end months of speculation as to the future of the former bank’s mortgage book, which has also been recently been linked to RBS and TSB-owner Sabadell.

It comprises £12bn of assets from the Granite securitisation vehicle set up by Northern Rock, as well as a further £1bn of non-Granite assets.

Following the purchase, Cerberus will refinance the Granite assets by buying the £12bn of mortgages out of the vehicle, which will then be wound up.

The outstanding securities will be repaid in full, and Cerberus has also agreed to sell £3.3bn of the assets to TSB.

Northern Rock borrowers will see no changes to the terms and conditions of their mortgages and management of the assets will remain within the mortgage servicing arm of UKAR.

The total portfolio is being sold for £280m more than book value, the Treasury says.

Chancellor George Osborne says: “Today marks another major milestone in clearing up the mess left by the financial crisis, with the sale of former Northern Rock mortgages.

“The sale, which raises £13bn for the British taxpayer, is the largest ever sale of financial assets by a British government, and we are now clear that taxpayers will get back more money from Northern Rock than they were forced to put in during the financial crisis.”

UKAR chief executive Richard Banks adds: “The sale of this £13bn loan book is a significant step in accelerating the repayment of our government loans and demonstrates our continuing success in maximising value for taxpayers.  I am also delighted UKAR will continue to service these loans.”