Rock pays back £2.2bn to Bank after sell-off

The speed with which the deal was done spurred hopes that Northern Rock, which suffered the first run on a bank in living memory, could actually be rescued because there is clear demand for its assets in the shape of its mortgage books.

The Northern Rock board hopes to see the final version today of Goldman Sachs' plans for raising new funds for the company's two rival rescue bids from Sir Richard Branson's Virgin consortium and Luqman Arnold's Olivant. Both rely on raising around £15 billion to pay off at least half the Bank of England loans immediately.

Goldman has suggested that some of the emergency loan could also be repackaged as commercial bonds and sold to other investors, possibly including sovereign wealth funds.

But any deal is also likely to include further sales from the former building society's mortgage book - like the one done today.

Chief executive Andy Kuipers said: "This is a relatively small transaction, representing around 2% of Northern Rock's gross assets, but it is a positive development in the company's ongoing strategic review. It illustrates the quality of our assets, which has enabled us to achieve a sale at a premium despite continuing difficult financial markets, and will allow us to reduce the debt with the Bank of England."

The sale is of a portfolio of home equity release mortgages, generally used by elderly home owners to raise cash, marketed under the Lifetime brand. Kuipers explained that while the portfolio earned £34 million in net interest in the last full year, this was far less than the "penal" interest which is charged by the Bank of England on the £2.2 billion sale price. Indeed, at the reported 7% interest rate being charged by the Bank, the annual interest bill would be more like £154 million.

He also pointed out that the portfolio had been sold at a modest 2.25% or £50 million premium to book value.

Today's transaction is also too small to be caught on the radar by the resolutions being put to shareholders by Northern Rock's two largest shareholders next week.

SRM Global Fund and RAB Capital, which together own almost 20% of the bank, have put forward proposals to restrict what the board can do without a shareholder vote. But even they have restricted the limit at which the board has to seek permission to assets totalling more than 5% of the company.