Britain’s ‘bad bank’ running down the loans of two bailed-out lenders repaid £4 billion to the Government last year, chipping away at a total owed of more than 10 times that amount.
Times are still quite fragile but the economy is stable. The outlook is a little uncertain still
UK Asset Resolution (UKAR), a ‘zombie bank’ that does not take new business, owes the Government £43.4 billion, down from £48.7 billion when it was created in October 2010.
Chief executive Richard Banks said he was “very confident” taxpayers would get back all the money the Government spent on rescuing Northern Rock and Bradford & Bingley during the 2008 financial crisis. He expects most of it to be repaid within 10 years.
“It does always depend on economic factors such as unemployment, interest rates and the general state of the economy,” he said.
Banks, who expects interest rates to stay at record-low levels in 2013, said there is potential for more customers to start getting into financial difficulties when interest rates eventually start rising again.
UKAR works with customers who have fallen behind on their mortgages to come up with repayment plans to prevent them having their homes repossessed and ensure the Government eventually gets its money back.
Government-owned UKAR made an underlying profit of £1.36 billion, up 25 per cent on the year before taking into account increased interest payments to Britain’s Finance Ministry. The higher rate of interest reduced its overall profit by £260 million.
Mortgage accounts three or more months in arrears fell by 23 per cent to 25,581.
Banks said he expects the number of mortgages in arrears to continue to decline this year although possibly at a slower pace than in 2012.
“We still see a regular number of new-to-arrears customers every month. Times are still quite fragile but the economy is stable. The outlook is a little uncertain still,” he said.
UKAR agreed last July to sell £465 million worth of mortgages to Virgin Money. Banks said he would be willing to sell more portfolios of loans to accelerate the pace at which it repays the Government.
“We are very open to offers from anybody else providing they represent good value to the taxpayer. Unfortunately, the price that people are willing to offer doesn’t always represent best value for us,” he said.
Banks said he was getting a “steady stream” of interest from possible buyers.
“The markets generally have opened up a lot in the last few months and therefore there’s a lot more interest and a lot more availability of cash,” he said.
UKAR said it had paid out £159 million to compensate Northern Rock customers who were mis-sold insurance on their mortgages, taking the total cost to date to £360 million.