Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment his Department has made of (a) the merits of the sale of £4.9 billion of former Northern Rock loans to Citibank on the ability of those mortgage loan holders to transfer or get better terms from other regulated lenders, (b) whether properties of Northern Rock mortgage holders' loans held under AKAR and sold between 2012 and 2018 were sold to (i) inactive and (ii) unregulated lenders.

As with all UKAR transactions, HM Treasury considered the potential impacts on customers and concluded that this sale does not negatively affect any customer’s ability to remortgage with another loan provider. In addition, UKAR have put in place protections that mean there are no financial barriers, such as early repayment charges, in the way of customers seeking to remortgage with another provider. Customers will be in a better position to change their mortgage following the proposed Financial Conduct Authority (FCA) rule change, provided they are up to date with their payments and meet lenders’ risk appetites.

The details of UKAR mortgage sales from 2012 to 2018 can be found on gov.uk. Both active and non-active lenders are invited to participate in UKAR sales to ensure a competitive process. In relation to the latest asset sale, UKAR’s advisors proactively invited the top 25 active lenders to participate. Notwithstanding this, UKAR did not receive a bid from an active lender that covered the full portfolio of assets being sold.

HMT has worked closely with the FCA on their mortgage market study and their planned changes to affordability assessments. These changes remove the regulatory barriers which previously might have prevented borrowers from accessing new mortgage deals, regardless of whether they are with active or inactive lenders. HMT will continue to work closely with the FCA once the changes to their rules are implemented to monitor the impact this will have on the market.

For the latest asset sale, the legal title to the regulated mortgage contracts will always be held by an FCA-regulated entity in addition to the existing regulatory requirement that they are serviced by an FCA-regulated entity. This ensures continued FCA oversight and that customers have access to the Financial Ombudsman Scheme. Moreover, the legal title holder will be required to provide regular loan level reporting to the FCA.