EFFORTS to either sell or outsource day-to-day mortgage servicing activities by Crossflatts-based UK Asset Resolution are on track, the company said.

UKAR, the state-owned bank behind failed lenders Bradford & Bingley and Northern Rock, announced in June that it had drawn up a shortlist of bidders to take on the mortgage work.

Announcing the company's results for the half year to September 30, chief executive Richard Banks said the move was '"proceeding to plan”, along with the planned sale of sale of £13billion of mortgage assets.

Mr Banks described the proposed deals as transformational to the business. and selling the mortgage servicing operations could result in "another name above the door" at Crossflatts.

Selling the mortgage assets would significantly speed up UKAR’s repayment of former Northern Rock assets to the Treasury.

During the half-year UKAR repaid another £500 million of government loans, taking total repayments to £14.6 million since UKAR was formed in 2010 to wind down the mortgage books of the failed Bradford & Bingley and 'bad bank' element of Northern Rock. The company ha now repaid 30 per cent of its government loans .

UKAR has also reduced its balance sheet by a further £8.5 billion bringing the total reduction to £58.2billion - or 50 per cent since 2010.This was achieved partly through the government loan repayment,funded by a 5.9 per cent reduction in lending balances, reflecting £2.7 billion of residential mortgage redemptions, UKAR's lending balances stood at £49.7 billion against £52.7billion at he end of 2014..

The first half of its financial year also saw the number of mortgage accounts three or more months in arrears, including possessions, reduced by 9.5 per cent to 10,835 , a 73 per cent fall since UKAR's formation.

Underlying interim profit before tax fell by £80.8 million in 2014 to £612.1million, which reflected reducing mortgage balances. and was in line with expectations.

Richard Banks said:"UKAR has continued to make good progress over the past six months, with a further £8.5billion reduction in our balance sheet.

"Arrears continue to fall and we remain committed to working with our customers to help them plan for the future.

"Earlier this year we commenced two transactions; the sale of £13billion of assets and the divestment of the mortgage servicing operation. Both are proceeding to plan.”

Customer numbers continued to fall in line with UKAR's objective from 389,000 last year to 366,000 and 429,000 mortgage accounts against 455,000 .

UKAR said 94 per cent of mortgage customers were up to date with their monthly payments.