UKAR success as £3.8bn is returned to the taxpayer

The state-run bank also said that mortgage accounts three or more months in arrears, including possessions, have fallen by 26 per cent this year to 18,993.

UKAR, which is running down the mortgage accounts on its books and doesn’t take on any new business, has now returned £8.3bn to the Government since its creation during the height of the banking crisis.

It initially owed £48.7bn when it was set up in October 2010.

The £3.8bn repayment reflects a 6.5 per cent reduction in UKAR’s loan book in the year to date as cheaper rates and more competition in the mortgage market enables borrowers to look for new deals.

It also follows the £400m sale of a portfolio of Northern Rock’s personal loans to OneSavings Bank – the group behind mutual Kent Reliance – and debt recovery business Marlin Financial.

UKAR has almost 490,000 customers and 553,000 mortgage accounts.

More than 90 per cent of its customers are up to date with their payments.

It is Britain’s seventh-largest mortgage lender.

The firm’s chief executive Richard Banks said the bank has managed to reduce arrears by working with customers in financial difficulty.

It has written to 19,000 customers with interest-only mortgages due to end in ten years or less to ensure they have plans in place to repay their loan.

Almost half of these customers have responded.

UKAR also works with a range of non-fee charging debt advice agencies to help customers reorganise their finances and ensure, wherever possible, that they can continue as homeowners.

Research conducted by YouGov and the Money Advice Service shows that individuals who seek advice are twice as likely to have their debt become manageable within 12 months compared to those who don’t.

The number of UKAR customers referred to debt advice agencies in the first nine months of 2013 was 3,290, down from 6,073 last year.

The bank said the reduction reflects the fall in number of customers entering into arrears.

UKAR said signs of economic recovery are emerging, both in the wider economy and in the housing and mortgage markets.

Its underlying pre-tax profit rose by 15 per cent during the period to £856m.

It has reduced the size of its balance sheet from £113.7bn to £79.3bn at the end of September.

During the first nine months of 2013, 43,000 arrangements were made with customers experiencing difficulties paying their mortgage and 1,600 account modifications were made to help customers pay off their debts.