Northern Rock: UK government sells record £13bn of mortgages to US private equity firm Cerberus

George Osborne, the UK Chancellor, celebrated the sale as a win for the UK taxpayer

Queues outside of a Northern Rock Branch (AFP/Getty)

The UK Government has sold £13 billion of Northern Rock mortgages to Cerberus, a US private equity firm, in what has been called the largest ever financial asset sale by a European government.

George Osborne, the UK Chancellor, celebrated the sale as a win for the UK taxpayer after the Government used taxpayers’ money to bail out Northern Rock when it went under in 2007.

“Today marks another major milestone in clearing up the mess left by the financial crisis, with the sale of former Northern Rock mortgages,” Mr Osborne said.

The mortgages were sold for £280 million more than their book value. The money will be used to shave a little off the national debt, which amounts to around £1 trillion. It will have no impact on the deficit, or the amount borrowed each year.

£13bn

Amount mortgages were sold to Cerberus for - £280m more than their book value

Richard Banks, chief executive of UK Asset Resolution which owns the bad bank parts of Northern Rock and Bradford & Bingley, said: “This deal does suggest that we can do better than our expectation of paying off the Government debt by 2025.”

When Northern Rock went under in 2007, Virgin Money bought the good bit of the bank, but much of its debt, including mortgages, were put into UK Asset Resolution, a bad bank, using taxpayers’ money.

These mortgages have become more valuable over time as they have been paid off, making them more attractive to private investors like Cerberus. With this sale, £28.6 billion of the total used to save Northern Rock and Bradford and Bingley remains on the Government’s balance sheet.

Additional reporting by Reuters