Around 130,000 customers of Northern Rock will find out in the coming months that the mortgage they have with the Newcastle-based lender, which was nationalised in 2008, is now owned by somebody else.
The borrowers will receive notification from the zombie bank, which took over the parts of Northern Rock rescued by taxpayers, that their home loans have been sold off as part of an attempt to help repay a loan from the Treasury.
It will be the moment that those 131,000 customers realise their mortgages were used to fund Granite, a complex financing vehicle that Northern Rock used to raise £50bn on the financial markets – to fund its mortgage lending before the credit crunch.
At its peak, Granite was the biggest financing vehicle of its kind in Europe. Northern Rock sold mortgages to Granite, and Granite paid for them by selling bonds to investors. It should have been a virtuous circle but when investor appetite for those bonds evaporated, the bank had a very public funding crisis.
Customers queued to withdraw their cash: the first run on a bank in more than century. But what was once a huge problem is now a huge asset: George Osborne is hoping that by selling off Granite, it will help him bring down the nation’s net debt by £13bn and return more money to the taxpayer.
