Government to sell Northern Rock mortgages: what it means for you

MoneySavingExpert.com explains what customers of UK Asset Resolution (UKAR), the "bad bank" created in 2010 to take on the management of NRAM loans, need to know.

What's happening?

The Government has today agreed to sell a portion of NRAM's mortgages and loans to Cerberus for £13 billion. However, Cerberus in turn has sold £3.3 billion worth of these assets to TSB Bank.

The sale is still subject to regulatory approval, and is not expected to officially complete until after March 2016.

I'm an NRAM customer. Am I affected?

This sale affects around 125,000 customers with mortgages and loans, out of a total of 367,000 people on UKAR's books. UKAR says it has no immediate plans to sell the remaining mortgage and loan book.

Those affected by this sale include:

• Around 71,000 standalone mortgage customers.

• Approximately 53,000 out of a total 84,000 'Together Mortgage' customers.

• And a further 500 customers who have a de-linked unsecured loan, which means they were 'Together Mortgage' customers, but they've since moved mortgage provider or paid off their mortgage, though are still repaying the Northern Rock loan attached to their mortgage.

Controversy has surrounded the 'Together Mortgage' product as many could borrow more than they could afford to repay. These customers were able to borrow up to 95% of the value of their homes on a secured basis, as well as take out unsecured loans of up to 30% of the value of their homes, capped at £30,000.

Further, Northern Rock was found to have given some the incorrect paperwork, resulting in it forking out £270m in compensation (see the Northern Rock pays £270m to 150,000 MSE News story).

These customers were able to borrow up to 95% of the value of their homes on a secured basis, as well as take out unsecured loans of up to 30% of the value of their homes, capped at £30,000.

However, this compensation was only awarded to customers who took out unsecured loans of under £25,000. The Court of Appeal ruled earlier this year that the 41,000 Northern Rock customers who took out unsecured loans of between £25,000 and £30,000 weren't due redress over the same paperwork blunder.

Will I be moved to Cerberus or to TSB?

TSB will take on the existing mortgages and unsecured loans of around 34,000 customers, while the remaining 91,000 will go to Cerberus.

When we asked how customers would be divided between each firm, we were told that the allocation will be "randomly selected" and that TSB has "no influence" on picking particular customers.

All 125,000 customers will be contacted directly to be told what's happening, although this isn't expected to happen until after March 2016 when the sale completes.

What will happen to the terms of my loan and/or mortgage?

Cerberus, TSB and UKAR all say "there will be no changes to the terms and conditions of the mortgages involved in this transaction".

However, when we pushed the firms on whether there would be any changes to the terms, rates, payment amounts or payment dates, we were only told there would be "no imminent change", although obviously if you're on a standard variable rate (SVR), the interest rate you pay can change if the Bank of England changes the base rate. Equally, the SVR can change at the whim of the lender, so TSB and Cerberus could change the rate at any stage.

Government to sell Northern Rock mortgages: what it means for you

Should I continue paying my loan and/or mortgage in the interim?

NRAM says customers "do not need to take any action" between now and March 2016, so you should continue to repay your loan and/or mortgage as normal.

Can I remortgage elsewhere?

'Together Mortgage' customers borrowed more than the value of their homes from NRAM, and when the recession hit and house prices crashed, many were left in negative equity unable to remortgage to get a better deal that also incorporated the up to 30% unsecured loan part of the mortgage deal.

Many of these customers today still say they feel "trapped" into paying the high 4.79% interest rate.

Standard NRAM mortgage borrowers may however find it easier to switch deal and remortgage elsewhere. See our Remortgage guide to find the best deal for you.

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