Northern Rock has today agreed to sell £2.2bn of mortgage assets to investment bank JP Morgan.
Northern Rock says it will use the money raised to help pay off money lent by the Bank of England during last summer’s credit crunch.
The firm's pension fund has also been forced to make changes, prompting it to ask the Bank and the Government to guarantee a potential deficit.
The Rock says it has sold the mortgage book to JP Morgan for a 2.25% premium over the value of the assets.
The sale, representing around 2% of Northern Rock’s total mortgage assets, will help the stricken mortgage lender pay back some of the £25bn it has borrowed from the Bank of England, equivalent to over £700 from every UK taxpayer.
The Rock also announced it has moved funds in its final salary pension scheme from shares to safer investments, such as bonds and cash deposits.
Because of the move to lower earning investments, the pension fund is likely to go from a current surplus to a deficit of £100m.
As a result, the trustees have asked Northern Rock and the Government to use some of the bank's mortgages as security.
A statement from the trustees says: "We have emphasised to the Board that members and the trustees of the scheme do not wish to remain unsecured creditors in these circumstances unless alternative additional protection is made available."
If you would like to comment on this story, contact:
Tel: 020 7034 2682
e-mail: [email protected]
Record numbers of people aged 90 plus
From 3 to 10 October
'Integral part' of the financial planning process for many advisers
Proposals outlined at Labour Party conference