Northern Rock announced yesterday that it has agreed to sell its portfolio of Lifetime home equity release mortgages to JPMorgan. The move will help pay back some of its loan to the Bank of England.

Northern Rock has agreed to keep running the portfolio of equity release mortgage products on behalf of JPMorgan.

Equity Release plans are more popular in the UK than they are in the US. They are aimed at people over 55 who want to release some or all of the equity they may have tied up in their homes. The sale of the equity release portfolio for £2.25bn bolstered the Northern Rock share price which closed at 87.25p up by 2p.

Northern Rock’s crisis began last year when they got caught up in the “credit crunch”, that resulted from fall out from US sub-prime mortgage problems. This inability to borrow meant that the bank was unable to fund their business model.

Northern Rock’s mortgage portfolio accounts for a large portion of the UK mortgage market. They are one of the top 5 UK mortgage lenders and the subsequent “run” on the bank saw a bail package (in the form of a loan) installed by the Bank of England. The loan deal enable Northern Rock to carry on trading, whilst it looked for funding from other sources.

Despite their problems, the bank is not giving up without a fight. Visit their website and a large banner states “We’re Open”. Online, equity release plans can be administered through their customer Internet Banking system.

The Northern Rock Lifetime portfolio (pre-sale) comprised around 2% of the Northern Rock’s assets. It currently consists three products

• Standard Lifetime Mortgage
• Cash Plus Lifetime Mortgage
• Protected Equity Lifetime Mortgage

Chief Executive Andy Kuipers is particularly happy with the equity release portfolio sale, as it achieved around £50m more than valued. He said “It illustrates the quality of our assets, which has enabled us to achieve a sale at a premium despite continuing difficult financial markets“.

Read more about Northern Rock equity release plans, or lifetime mortgage schemes, at their website

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