Government sells off £13bn of mortgage assets
Chancellor George Osborne has announced it is offloading an estimated £13bn worth of mortgage assets it took on after bailing out lenders Northern Rock and Bradford & Bingley in 2008.
The chancellor said the money would be used to help pay down national debt. “The last government put taxpayers’ money into the banks – and this government is getting it back,” he said.
But fiscal experts warn that if the government fire sale rids it of a mountain of mortgages with a high loan to value ratio then the purchaser will pay a lower amount for the risk.
This could lead to existing borrowers being forced to take out new deals, which has the potential to push up interest rates.
But fiscal experts warn that the buyers could force existing borrowers into new deals and push up interest rates.
“Over the past five years, banks have found it hard to exit non-core UK residential mortgage portfolios,” explained Andrew Jenke, a partner at professional services firm KPMG.
“This has changed recently because of more new lenders, greater demand for UK residential mortgage-backed security and surplus liquidity from larger banks. We expect to see further demand and deal activity in this space through 2015, evidenced by the Chancellor’s comments.”
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