Co-operative Bank to transfer thousands of mortgage borrowers to outside entity

Thousands of struggling homeowners known as mortgage prisoners are once again at the centre of a financial controversy, as the Co-operative Bank prepares to transfer its MAS5 mortgage portfolio to Topaz Finance, an inactive lender with no new business operations.

The move, expected to take place in the coming weeks, has drawn sharp criticism from campaigners and has renewed questions about how the UK financial sector treats vulnerable borrowers, more than a decade after the 2008 crisis locked many into high-cost, inflexible mortgage deals. An unwanted transfer

The MAS5 portfolio consists of legacy mortgages, many issued before the financial crisis by Northern Rock and Bradford & Bingley, which later fell into government ownership. The loans were acquired by private equity and then managed by various institutions. These borrowers, now widely known as mortgage prisoners, often meet the affordability criteria for a new loan but are unable to switch due to technical regulatory constraints.

While the Co-operative Bank holds the legal title to the MAS5 loans, it does not hold their beneficial ownership. In a statement, the bank said it is transferring legal title to Topaz Finance “in the coming weeks” and has promised customers that their terms and conditions will remain unchanged. Customers are being notified of the shift in June.“This is a straightforward administrative process,” a spokesperson said, downplaying the significance of the transfer.

However, for mortgage prisoners and advocacy groups, the consequences feel far from benign.

Campaigners denounce a missed opportunity. The UK Mortgage Prisoner Group expressed frustration and dismay over the decision, particularly in light of the Co-operative Bank’s recent acquisition by Coventry Building Society, an active mortgage lender. “We had hoped Coventry’s involvement would bring these borrowers back into the mainstream lending market,” the group said in a statement. “Instead, they’ve been passed to an inactive firm, offering no real pathway out of their financial limbo.”

Campaigners argue that by excluding the MAS5 customers from the Coventry merger, the Co-operative Bank denied them access to potentially more affordable mortgage options—a move they describe as a “two-tier” approach to customer treatment.

Regulatory concerns mount

The transaction has raised concerns about potential violations of the Financial Conduct Authority’s (FCA) Consumer Duty rules, which require firms to act to deliver good outcomes for customers.

“It would be interesting to know the FCA’s view on how this transfer aligns with the fair treatment obligations under the new duty,” the Mortgage Prisoner Group said.

The FCA has long acknowledged the plight of mortgage prisoners and introduced rule changes aimed at helping them switch to better deals. Yet critics say these measures have had limited real-world effect, especially when portfolios are passed to firms that do not offer new products.
Who is Topaz Finance?

Topaz Finance Limited is not a household name, and that’s by design. It is a servicing arm associated with Engage Credit and ultimately controlled by Cerberus Capital Management, a major U.S.-based private equity firm known for acquiring distressed assets. Topaz does not originate new loans but specializes in managing legacy mortgage portfolios. For many customers, this means that while their day-to-day servicing might appear unchanged, their ability to refinance or negotiate improved terms remains severely constrained.

Wider implications for the market

The Co-operative Bank’s refusal to include MAS5 customers in the Coventry deal has renewed scrutiny over the opaque nature of many mortgage sales and transfers. It also highlights the lingering consequences of Britain’s financial crisis, which are still being felt by tens of thousands of homeowners more than 15 years on. Consumer advocates are now urging regulators and lawmakers to ensure that financial institutions treat all customers equally, particularly when mergers or restructurings take place. “There needs to be accountability,” the Mortgage Prisoner Group insisted. “Why were these customers left behind?”