Parliamentary report slams sale of Northern Rock mortgages to Cerberus

The government may have sold a portfolio of mortgage assets rescued from the collapsed Northern Rock bank for less than it was worth, a report from the Public Accounts Committee said on Wednesday, with mortgage holders having also been left disadvantaged.

Looking into the sale to Cerberus Capital Management of the £13bn portfolio by UK Asset Resolution, the body that arranged what was the state's biggest-ever sale of financial assets, the parliamentary committee said there was "no formal business case for the sale and alternative sale options were not valued until very late in the sale process".

It said the Treasury should set up an independent panel of valuation experts for future sales and ensure selling valuations are better informed by market data.

"The valuations of the assets sold erred on the side of caution and the assumptions on which they were based were not well evidenced, creating a risk that UKAR could have sold the asset for less than its inherent worth," the committee said.

Northern Rock customers who had their mortgages sold to the New York-based private investment firm are paying more than those whose mortgages remain with UKAR, the report found, as Cerberus said its funding model did not benefit from the base rate cut to the same extent as banks did.

While congratulating UKAR and its advisers for overcoming the difficulties of a sale that was four times larger than any it had completed before, the report also said the process used to appoint Credit Suisse as its financial adviser for the sale "did not follow good practice".