The “bad bank”, established by the Government to manage the assets of collapsed lenders Northern Rock and Bradford & Bingley, will on Thursday lay out plans to offload £5.5bn of housing loans through an auction.

UK Asset Resolution (UKAR) is expected to release details of the upcoming mortgage sales when it publishes results on Thursday morning.

It began preparations for the loan sale in July, at which point its chief executive, Ian Hares, had said it was expected to launch “in the next coming months”.

He had said the business was also starting “to think about what happens next”.

The proceeds from the mortgage sale, first reported by Sky News, will go towards repaying the remaining £4.7bn of a Treasury loan to the Financial Services Compensation Scheme.

UKAR has already managed to reduce its balance sheet substantially, having earlier this year sold a portfolio of Bradford & Bingley mortgages for £11.8bn. Its balance sheet stood at £116bn in 2010, but as of July this year, had shrunk to £23bn.

UKAR declined to comment.

It comes a week after the Treasury set a deadline for when it will start selling its 71pc stake in RBS by in the Budget.

It said it “intends to recommence the privatisation of RBS before the end of 2018-19 and to carry out over the forecast period a programme of sales expected to dispose of about £15bn worth of shares, which represents around two-thirds of our stake at current market prices”.