Belfast Telegraph

Northern Rock plans mortgage bundle offload to boost lending

Nationalised Northern Rock is to bundle up its mortgages for sale in money markets for the first time since its collapse into public hands.

The taxpayer-owned bank has said it will package together some of its 'high quality' home loans to offload as part of a so-called mortgage securitisation as it seeks to boost funds for lending.

The move is a further sign Northern Rock is getting back to "business as usual" ahead of a potential sale back into the private sector.

New lending at the bank has been predominantly funded only by retail savings after its bailout at the height of the financial crisis.

Securitisation markets have only recently started reopening after shutting down amid the credit squeeze, when these investments began unravelling as over-stretched borrowers defaulted on their loans.

Mortgage-backed securities allow banks to bundle loans into instruments that are sold in the markets, freeing up their balance sheets and providing them with room to offer more loans.

They were largely blamed for causing the credit squeeze that brought banks such as Northern Rock to their knees.

It has emerged since the crunch that many mortgage-backed securities were based on risky loans, taken out at the height of the borrowing boom.

Northern Rock insisted it would only place high quality UK mortgage assets in its securitisation and that it would remain majority funded by retail savings.