Taxpayers make another £538 million from Northern Rock sale

Virgin Money has paid a further £73 million to the government for bailed out Northern Rock, which it bought at the end of last year.

This is £23 million more than the £50 million the government expected to receive and takes the total amount paid for Northern Rock to £820 million – still some way short of the £1.4 billion the government spent bailing out the mortgage giant during 2007/2008.

HM Treasury is, however, expected to receive more than £1 billion in total for the deal over the next five years.

Virgin Money has also bought £465 million worth of mortgages from Northern Rock Asset Management.

Following the bank’s £1.4 billion bailout Northern Rock was split into a ‘good bank’ – the savings and mortgages portfolio – and ‘bad bank’ – the Asset Management business. Virgin Money only bought the good bit of Northern Rock in November, leaving the government with an estimated £21 billion worth of closed mortgages and bad loans.

The sale will not affect the terms and conditions of the mortgages and all customers impacted will be contacted directly by Northern Rock Asset Management and Virgin Money later in the year.

Keith Morgan, of UK Financial Investments (UKFI), which is in charge of the sale, said: 'We are pleased with this outcome which delivers additional proceeds that taxpayers will receive from both the sale of Northern Rock plc and the sale of UKAR mortgage assets to Virgin Money'. In total taxpayers are making a further £538 million.

'These transactions are consistent with UKFI’s objective to manage the Government investments commercially and to create and protect value for the taxpayer as shareholder,' he added.