Government sells £860m Bradford & Bingley and Northern Rock mortgages

The Government has sold off an £860 million mortgage portfolio owned by collapsed lenders Bradford & Bingley and Northern Rock to Rothesay Life.

The mortgages had been managed UK Asset Resolution (Ukar), the so-called bad bank that looked after the assets of Bradford & Bingley and Northern Rock after their collapse and nationalisation in 2008.

“Following a highly competitive auction, these mortgages will be sold to Rothesay Life, a Financial Conduct Authority and Prudential Regulation Authority-regulated firm,” Ukar said on Thursday.

“There will be no changes to the terms and conditions of the mortgages sold. Borrowers do not need to take any action.”

The deal brings the Government a step closer to a final wind-down of the firms, which became symbolic of the financial crisis in the UK.

Proceeds from the sale will be used to pay down the national debt but, because of costs linked to the unwinding of interest rate swaps, the debt reduction will be less than the sale proceeds.

“Due to the fall in long-term interest rates, there is a substantial cost for terminating the swaps which is expected to exceed the profit on the sale of the loans, resulting in a net overall accounting loss on the two transactions,” Ukar added.

Following this transaction, Ukar now owns around £13 billion worth of assets, down from £21 billion in September 2017 and from £116 billion in 2010.

Chancellor Philip Hammond said: “We’re continuing to recover the money the taxpayer committed during the financial crash, and the sale of these loans moves us one step closer. The proceeds of this sale will go towards reducing our national debt.”

In April, an investor group led by Barclays agreed to buy two other mortgage books from Bradford & Bingley for £5.3 billion.