UK Asset Resolution sale of an £860 million mortgage portfolio
The sale of an £860 million equity release mortgage portfolio, owned by Bradford & Bingley (B&B) and NRAM Limited (formerly part of Northern Rock), has been authorised by the Chancellor.
These mortgages were acquired by the taxpayer during the financial crisis and their sale simplifies the books of both B&B and NRAM, bringing the government closer to the final wind-down of these companies. It also marks a milestone in the plan to recover taxpayers’ money - ten years on.
Following a highly competitive auction, these mortgages will be sold to Rothesay Life, a Financial Conduct Authority and Prudential Regulation Authority regulated firm.
There will be no changes to the terms and conditions of the mortgages sold. Borrowers do not need to take any action.
UK Asset Resolution (UKAR), the holding company for B&B and NRAM, will also at the same time terminate interest rate swaps, which hedge the risk of changes in interest rates, held against these mortgages. These swaps were taken out by B&B and Northern Rock more than 10 years ago when the loans were issued, in line with good risk management practice. 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.
The assets will be sold for a price above their book value. Proceeds from this sale will be used to pay down the national debt. However, given the unwinding of the swaps, national debt will be reduced by an amount which is less than the sale proceeds. These figures are subject to an adjustment mechanism and will be known when the transaction completes in the next few weeks, and subsequently disclosed to Parliament.
The Chancellor of the Exchequer, 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.
B&B’s and NRAM Limited’s closed loan books are managed by UKAR on behalf of the taxpayer. Following this transaction, UKAR now owns c.£13 billion worth of assets, down from £21 billion in September 2017 and from £116 billion in 2010.
As a result of this transaction UKAR expects to repay approximately £1 billion of the government loan which is made up of a number of components in addition to the actual sales proceeds. Following repayment, UKAR will have repaid 94% of its loans from the government.
Latest News from
‘All change’ at the Royal Mint13/12/2018 09:10:00
The Treasury yesterday announced the appointment of Graham Love as Non-Executive Chair of the Royal Mint.
Bloomberg Global Regulatory: Chancellor speech12/12/2018 13:25:00
The Chancellor of the Exchequer Philip Hammond's speech given yesterday at the Bloomberg Global Regulatory on emerging and growth markets.
UK takes top spot in fight against dirty money10/12/2018 11:10:00
New report from the Financial Action Task Force ranks the UK world-leading in the fight against illicit finance.
Exchequer Secretary speech: Pensions and Lifetime Savings Association Trustee Conference07/12/2018 16:47:00
The Exchequer Secretary, Robert Jenrick's speech given yesterday at the Pensions and Lifetime Savings Association (PLSA) Trustee Conference 2018.
£8 million funding scheme for customs intermediaries and traders open04/12/2018 17:01:00
HM Treasury and HMRC grants for training and IT improvements ahead of UK leaving the EU.
X Factor charity song 2018: Government to donate VAT to children’s charities03/12/2018 15:20:00
VAT collected on sales of the X Factor winner’s charity song will be donated to children’s charities, Together for Short Lives and Shooting Star Chase, Chancellor of the Exchequer, Philip Hammond, announced.
Christmas bonus for millions of workers03/12/2018 11:12:00
Workers can claim a rebate on their expenses and get and an early present from HMRC.
More than 400,000 first time buyers step onto the housing ladder with Help to Buy30/11/2018 15:44:00
Over 400,000 people have been able to buy their first home thanks to the Government’s Help to Buy schemes, new figures show today.