Baldwin defends sale of Northern Rock mortgages

Baldwin defends sale of Northern Rock mortgages

The economic secretary to HM Treasury has defended her department’s sale of 125,000 Northern Rock mortgages to a US private equity firm.

Harriett Baldwin was responding to concerns raised by Andrew Tyrie, the chairman of the Treasury select committee, that short-term profitability has been prioritised over the long-term value of the assets.

Ms Baldwin said: “It was, of course, critically important to us that the sale achieved good value - in line with that which a commercial seller of such assets would expect to receive.

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“If that had not been the case, then we would simply not have proceeded with the sale.”

She said HM Treasury devised a three-part test when it sold the mortgages to Cerberus Capital Management in November.

Ms Baldwin said the Treasury sought assurance that market conditions were right to support a sale, the sale followed a highly competitive process and UK Asset Resolution and UK Financial Investments both tested all bids against benchmark valuations.

The mortgages, which were originally owned by Northern Rock, were taken on by UK Asset Resolution when the Newcastle-based company was nationalised in 2008.

UKAR said it would be selling the portfolio for £280m more than its book value.

When Ms Baldwin was asked in Parliament what the book value of the portfolio was, she simply said Cerberus has agreed to sell £3.3bn of the loans to TSB.

Mr Tyrie also raised concerns that customers would be adversely affected by the sale.

But Ms Baldwin said: “As UKAR made clear when it announced the sale, the continued fair treatment of customers was a key consideration throughout the process.

“The mortgages will continue to be serviced by the same people in UKAR who service them today, bringing to bear the expertise and experience in working with these mortgage customers that they have developed over recent years. And there is no change in the terms and conditions of the mortgages being sold.

“But the ultimate comfort that customers can take is that these mortgages are regulated in full by the Financial Conduct Authority.”