This brings the total reduction to £49.7bn, down almost 43% since formation of UKAR in 2010.
It has also paid a further £3.7bn to the government, bringing total repayments to £14.1bn since UKAR was formed. Almost 30% of the government loans have now been repaid.
Mortgage accounts with three or more months in arrears, including possessions, have reduced by 23% during the year to 11,976 (70% since formation).
UKAR has now looking to sell mortgage assets totalling around £13bn, as well as its mortgage servicing operations.
UKAR said that the sale will "accelerate repayment of the government loans whilst ensuring the stability and continuity of service to customers".
The firm has already sold a portfolio of performing mortgages for £2.7bn, at a premium of around £55m over book value.
The organisation has also set aside remediation provisions of £295m, mainly for the potential redress of historic issues relating to unsecured loans greater than £25k.
Richard Banks, UKAR Chief Executive, commented:
"Over the past four and half years we have achieved excellent results, reducing the balance sheet by nearly £50bn and overseeing a 70% fall in the number of mortgage accounts three or more months in arrears. To build on our success we are now progressing two ambitious divestment projects which, if successful, will accelerate repayment of the government loans and ensure the stability of service to customers."
