The Treasury has sold £13 billion of Northern Rock mortgages to investment firm Cerberus Capital Management in what is described as the largest ever asset sale by a European government.
UK Asset Resolution (Ukar), the "bad bank" created in 2010 to run down the loans in Northern Rock and Bradford & Bingley, said the sale would include residential mortgages and unsecured loans from the legacy book of Northern Rock Asset Management (NRAM).
The sale represents a £280 million premium over book value at June 30 2015, according to Ukar, which added that it expects to repay around £5.5 billion of the NRAM Government loan as a result of the transaction.
Mortgage customers affected do not need to do anything as they will be contacted directly to explain the change, and there will be no change to the terms and conditions of the mortgages involved.
Chancellor George Osborne said it was now clear that taxpayers would receive more money from Northern Rock than they put in during the financial crisis, and the move means the Government has offloaded more than 85% of the assets of the former bank.
He added: "Today marks another major milestone in clearing up the mess left by the financial crisis, with the sale of former Northern Rock mortgages.
"The highly competitive process, unprecedented scale, and the fact that these mortgages have been sold for almost £300 million 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."
Ukar chief executive Richard Banks said: "The sale of this 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."
The sale brings the total Ukar balance sheet reduction to £73.5 billion since formation in 2010.
TSB Bank has revealed it will take on £3.3 billion of the former Northern Rock mortgages and loans from Cerberus, meaning it effectively becomes the lender to an additional 34,000 homeowners across the UK.
TSB chief executive Paul Pester said the bank was well-placed to take on the loans as it had one of the highest capital ratios in the industry.
"In addition, they will significantly enhance TSB's profitability which, in turn, will help us to continue to deliver our growth strategy - helping us to bring more competition to UK banking," he said.
As with the broader sale, the terms and conditions of the existing loan agreements will remain unchanged and UKAR's mortgage servicing arm will continue to service the loans.