Britain's 'bad bank' created in the aftermath of the financial crisis has finally sold its remaining stake in Northern Rock and Bradford & Bingley for £5billion.
UK Asset Resolution (UKAR), the company set up by the Government to hold Northern Rock and B&B when they were bailed out by the taxpayer, has sold the businesses and their 29,000 remaining mortgages to a group headed by US hedge fund Davidson Kempner and Citibank.
But campaigners have raised concerns that many of those whose debts have been snapped up could find themselves so-called mortgage prisoners, locked into high interest rate products.
Sale: UK Asset Resolution was the company set up by the Government to hold Northern Rock and Bradford & Bingley when they were bailed out by the taxpayer
The Treasury and UKAR said that all bidders 'were required to agree to a robust package of customer protections', and that borrowers would not see any changes to the terms of their loans. But Rachel Neale, a campaigner at UK Mortgage Prisoners whose Northern Rock mortgages was sold to Cerberus Capital Management six years ago, said the deal 'set alarm bells ringing'.
She added: 'It's condemning these 29,000 people to years as mortgage prisoners.'
Borrowers who originally took out Standard Variable Rate (SVR) mortgages with Northern Rock and B&B, but who had their debt sold on to hedge fund buyers such as Davidson Kempner after the banks collapsed, have found themselves locked on higher interest rates even as wider rates have tumbled. This is because hedge funds are usually not licenced to lend, so cannot offer to swap customers onto cheaper and more affordable mortgages.
Though the customers are technically allowed to switch to a new provider, many are unable to because of stricter affordability checks brought in since the financial crisis, which mean major banks refuse to take them on.
This leaves them trapped on sky-high rates which have pushed many customers to the edge of bankruptcy, and have led some to lose their homes.
A spokesman for UKAR confirmed that the Davidson Kempner-Citibank partnership will not have a licence to lend, and so will not be able to offer cheaper products to the 29,000 customers whose mortgages they have bought.