Tyrie tells Osborne to get out of the mortgage business

Tyrie tells Osborne to get out of the mortgage business

Andrew Tyrie has warned the Treasury it must ensure an orderly exit from the Bradford & Bingley and Northern Rock mortgage businesses.

In a letter to the Chancellor earlier this week, the chairman of the Treasury Select Committee stated: “The fact this needs to be done to facilitate the orderly run-down of Ukar’s [the government’s UK Asset Resolution] mortgage book illustrates the costs and hazards of government intervention in the mortgage business.

At the start of May, Bradford & Bingley entered into a binding agreement for the transfer of its mortgage servicing operations to Computershare. A statement from Ukar explained it is a seven-year outsourcing contract covering £30bn of assets, with Ukar continuing to own the mortgages and promising no changes to customers’ terms and conditions.

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The following day, the government also announced completion of the £13bn sale of former Northern Rock mortgages.

In his letter to George Osborne, Mr Tyrie wrote: “It would be helpful for the committee to have an assurance that every reasonable step has been taken to learn the lessons of the sorry Ukar experience.”

In the wake of the 2008 financial crisis, the Treasury set up a limited company called UK Financial Investments to manage its shareholdings in banks subscribing to the recapitalisation fund.

Two years later it created UK Asset Resolution to manage the closed mortgage books of failed banks Bradford & Bingley and Northern Rock. By 2013, UKAR had paid back some £5.2bn of government funding from the nationalisation of the banks.

The number of mortgage customers fell to 587,000 during 2012 (compared to 638,000 in 2011) as credit-worthy customers refinanced their mortgages and moved to other providers.

By March of this year, the government confirmed plans to completely sell off mortgages owned by Bradford & Bingley by 2017 or 2018.

Mr Tyrie commented: “All necessary steps should now be taken to ensure that the government is able to get out of the mortgage business in an orderly fashion.

“Taxpayer and customer interests need to be protected, and the government should ensure that lessons are learned for the future.”