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Taxpayers make another £538 million from Northern Rock sale

Virgin Money has paid the government a further £73 million for bailed out Northern Rock and bought £465 million worth of mortgages.

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.

5 comments so far. Why not have your say?

bobs bit

Jul 23, 2012 at 14:46

Sorry I must be stupid, how can we be making £538 million when we are losing over £21 billion?

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Poor pensioner

Jul 23, 2012 at 15:08

They should have bought the mortgages of 'bad' Northern Rock. We have a buy-to-let mortgage with that section which is 'rock' solid and covered many times over by the property and our other assets and is earning the bad bank 4.7% pa until 2020, so if that's a typical bad risk, what's a good one?

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derek farman

Jul 23, 2012 at 15:54

This makes the previous government's opinion that the shareholders shares had nil value, so we were left with nothing, seem like a real con. What am I saying! 'seem like' was a con.

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Graham Barlow

Jul 23, 2012 at 17:07

It was mainly a complete loss of confidence in the Bank's ability to pay out its depositors, and due to its ridiculous gearing would have gone Bankcrupt as there was no possibility of taking it down from the interbank market. A classic Bank no no , Lending long and Borrowing short with no alternative source of borrowing available. Clearly the Board CEO and FD were unschooled in the practice of Banking. How did they get the Jobs?

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Jul 23, 2012 at 19:21

Could the writer of the article explain how selling a £465 million mortgage book creates a profit. Did the these mortgages have no value in NRAM's accounts? Would be surprising if they did.

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