The state-owned firm responsible for winding down the mortgage books of failed lenders Bradford & Bingley and Northern Rock increased its repayments to the Treasury by £1.2 billion in 2012.

UK Asset Resolution (Ukar) said it paid £4 billion to the taxpayer in 2012, up from £2.8 billion a year earlier.

The company, which has almost 615,000 customers, said the proportion of mortgages three or more months in arrears fell 23%, helped by low interest rates and "proactive arrears management".

Ukar was formed in October 2010 to manage the loan books of B&B and Northern Rock after the former building societies failed during the financial crisis.

Chairman Richard Pym said Ukar's debt to the Treasury has since fallen from £48.7 billion to £43.4 billion. "We still have a long way to go, but it remains our expectation and determination to repay that debt in full," he said.

Ukar set aside another £130 million in 2012 to compensate customers mis-sold payment protection insurance (PPI) by Northern Rock, taking its total bill for PPI to £368 million.

It also said a paperwork mistake, uncovered last year, will cost it about £271 million in repayments to customers.

It was forced to admit the error in December after documents and statements sent to customers of Northern Rock Asset Management, one of its predecessors, did not comply with the Consumer Credit Act.

Combined with debt buybacks, these charges hit Ukar's bottom line, with pre-tax profits almost halving to £690.5 million.

The number of accounts three or more months in arrears fell to 25,581 in 2012 from 33,216 a year earlier, helping its bad debt charge fall from £390 million to £241 million. It repossessed 7,326 properties in 2012, down from 8,848 in 2011.