The government has done a deal with a private equity firm to sell some of the mortgages that were taken out from Northern Rock before the bank failed at the start of the financial crisis.
What is happening?
Around 125,000 mortgages that were taken out from Northern Rock have been sold to new firms. The home loans were borrowed from the bank before its failure in September 2007 and subsequent nationalisation the following year.
UK Asset Resolution (UKAR), the zombie bank created by the government to hold and run down the loans in Northern Rock and Bradford & Bingley, has 389,000 mortgage and loan customers. The mortgages that have been sold were part of Granite – a financing vehicle set up by Northern Rock. The whole of Granite was sold to the US investment firm Cerberus Capital Management for £12bn; it automatically sold off 34,000 of the mortgages to TSB.
Has my mortgage been sold?
If it was from Northern Rock it might have been. You will be notified by UKAR if your mortgage is one of those that has been sold and told what happens next.
The majority (92%) of the loans held by Granite are variable-rate mortgages and Northern Rock’s infamous Together mortgages, which allowed customers to borrow 125% of the value of the home they intended to buy. Although at the last count only 2% of the mortgages were in negative equity, there were bad debts on some of the loans that ran alongside them. Around 50,000 personal loans – which last as long the home loans attached – are part of the Granite sale, and some £1bn worth are in arrears.
Some of the Together mortgages and loans are in the portfolio that has been bought by TSB.
What happens next?
You should get a letter telling you that your mortgage is being transferred, but you will not have to do anything about it. Terms and conditions on your mortgage and any additional loan will stay the same. And UKAR will still service the mortgages, so you won’t need to worry about your repayments changing.
If you are in a position to remortgage, you might want to consider doing so. Northern Rock’s variable rate is 4.79%, which is higher than the cost of a new fixed-rate mortgage, and all borrowers with the bank can switch without paying early redemption charges.
Who is left with UKAR?
Some Northern Rock customers are still in the government-owned bank, including 31,000 with Together mortgages, along with borrowers who took out mortgages from Bradford & Bingley.
