£13bn Sell-Off Of Northern Rock Mortgages

The Government has agreed to sell off a £13bn chunk of former Northern Rock mortgages it acquired during the financial crisis.

Chancellor George Osborne authorised the deal which will see the assets sold by holding company UK Asset Resolution (UKAR) - the "bad bank" which also took over loans from Bradford & Bingley - to US-based private investment firm Cerberus.

The Treasury said it was the largest ever financial asset sale by a government in Europe, and that it would generate £280m more than the book value of the loans, proceeds which will be used to pay down the national debt.

The deal means the Government has now disposed of more than 85% of the assets of the Northern Rock, which was rescued in 2008.

It (Other OTC: ITGL - news) will see Cerberus sell on £3.3bn of the assets to TSB - the revived brand spun out of Lloyds Banking Group (Other OTC: LLOBF - news) which is now owned by Spain's Banco de Sabadell (Other OTC: BNDSY - news) . TSB said it would become the mortgage lender to 34,000 more homeowners across the UK.

Mr Osborne said: "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.

"The highly competitive process, unprecedented scale, and the fact that these mortgages have been sold for almost £300m more than their book value demonstrates the confidence investors have in the UK, which has only been made possible by the success of our long term plan."

The Government said there would be no changes to the terms and conditions of the mortgages sold and customers would not need to take any action.

The sale is part of plans set out earlier this year for the biggest ever sale of publicly owned corporate and financial assets in a financial year, exceeding £30bn in real terms for the first time. The latest announcement means the total so far stands at £24bn.

Cerberus has bought the assets after a six-month bidding process. It comprises residential mortgages which are both performing and "non-performing" - that is, where payments are or close to being in default - as well as unsecured loans, from Northern Rock.

UKAR chief executive Richard Banks said: "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."

The transaction is subject to approvals and completion for the majority of assets is expected next month, with the remainder in March next year.