Kensington Mortgages launches credit recovery range and re-enters 95 per cent LTV
The credit recovery range, Resi 6, has a two and five-year fixed rate term with rates starting from 4.49 per cent.
It is available for both purchase and remortgage up to 85 per cent loan to value (LTV) and has a maximum loan size of £500,000. It also comes with free valuations and legals on certain LTVs.
The specialist lender has also relaunched its 95 per cent LTV residential range, with rates beginning from 5.19 per cent for a two-year fixed rate.
Kensington withdrew the 95 per cent LTV product last year at the start of the pandemic. It has since offered it on a limited distribution basis on certain cases over the past few weeks.
The specialist lender has also reduced rates for its residential select range at 90 per cent LTV, with rates now starting from 4.69 per cent.
It has also cut the rates for its large loan offering, with rates now pegged at 3.34 per cent for 75 per cent LTV for loans between £500,000 and £2m.
The lender has expanded its green mortgage offering to include buy-to-let. The product gives £1,000 cashback to landlords for improving energy efficiency of housing stock within the first 12 months of ownership.
The other option is a £500 reward upon completion when purchasing a new build property with an EPC rating of A or B.
Kensington Mortgages new business director Craig McKinlay said: “The pandemic has put an unprecedented strain on everyone, particularly the self-employed and small business owners, and many have experienced a bump in the road.
“Lenders shouldn’t use this blip against individuals though, and instead help those who have struggled over the last year with flexible and innovative solutions.”
Strong GDP growth indicates slow and steady path for interest rate rises – Maddox
MPC members all also backed maintaining the stock of sterling non-financial investment grade corporate bond purchases at £20 billion, and held total volume of quantitative easing at £895 billion overall.
Since May’s meeting, growth in gross domestic product (GDP) globally has been stronger than anticipated. The expected level of UK GDP in Q2 2021 is now 1.5 per cent above what was previously predicted.
June is expected to be about 2.5 per cent below its pre-Covid Q4 2019 level. A faster recovery has been in large part due to consumer-facing services, as restrictions eased from April onwards.
Twelve-month consumer price index (CPI) inflation rose from 1.5 per cent in April to 2.1 per cent in May, above the MPC’s two per cent target and earlier than predicted. Inflation is expected to rise further and is likely to exceed three per cent for a short period this year, primarily due to developments in energy prices.
The MPC predicts that there will be a period of strong GDP growth and above-target inflation, after which inflation will fall back in line.
The latest unemployment figures from the Office for National Statistics indicate that unemployment has dropped slightly in recent months and stood at 4.7 per cent in the three months to April 2021.
Also, the number of jobs furloughed under the Coronavirus Job Retention Scheme (CJRS) has continued to drop with 3.6 million jobs furloughed in April, dropping to below two million in May and around 50 per cent of those are on a flexible form of furlough.
|Forecast in rates (changes rounded to nearest 0.25 per cent)
|Bank of England Base Rate*
|2yr Fixed Rate**
|3yr Fixed Rate**
|5yr Fixed Rate**
|10yr Fixed Rate**
* Using OIS Curve
**Based on the swap curve
With the Bank of England Base Rate currently held at its very low, 10 bps level, the markets have suggested that the rate will remain flat over the next year whilst the economy continues to recover and will then start to rise in two years.
However, this rise is predicted to be slower than previously expected, with the base rate rising to 25 bps then 50 bps in two and three years respectively.
Forecasts remain wholly unchanged for the two-year and three-year fixed rates staying flat over the next six months before beginning to rise towards the end of this year.
The two-year fixed rate is set to increase from 25 bps to 50 bps in twelve months and to 75 bps in two years, and the three-year fixed rate to increase to 75 bps in 12 months’ time and then to one per cent in three years. In respect of the five-year rates, it’s expected that the long-term rate will increase to one per cent in two years.
UK securitisation market
The UK residential mortgage backed securities (RMBS) primary markets have been a lot more active over the last few weeks with six issuances into the market since mid-May, one from a prime lender and the remainder from the specialist market, including Kensington’s own inaugural green bond, the first Green UK RMBS issuance.
Year-to-date there have been over £9.7 billion of UK RMBS paper placed into the market.
Kensington Mortgages removes three months saving requirement for borrowers
The lender introduced the criteria at the start of the pandemic which required potential borrowers to have evidence of savings for the period to cover mortgage payments in case income became unstable.
In a note to brokers, Kensington Mortgages also said it would accept income evidence for SEISS and Business Support Grants, Job Retention Scheme Payments and Bounce Back Loans as well as Coronavirus Business Interruption Loans.
Brokers recently told Mortgage Solutions that attitudes to government support and grants remained mixed from lenders, with some taking a more cautious approach if a borrower had taken forbearance.
The lender also said it would accept cases where employees had been on furlough, as long as it was not in the last three months.
A Kensington Mortgages spokesperson said: “As we entered the pandemic, we tightened our lending criteria to ensure we continued to lend responsibly in a very uncertain macroeconomic environment.
“As we now start to exit the pandemic, it is only right that we should loosen some of these extra checks that were put in place. We are also pleased to provide clarity on how we will treat funds raised through some of the government support schemes by self-employed borrowers.”
Speaking on a webinar this morning, Kensington Mortgages new business director Craig McKinlay said the self-employed market was “massively important” to the lender and around half of its business came from this area.
He also said the lender would be introducing flexible products which would allow brokers and customers to elect last year accounts if they had a good year or use an average over the past two years if it was not.
“I think we are going to get more and more self-employed people.
“So having those kinds of flexible policies and really trying to understand what happened and understand where things were just a one-off, for instance government grants and furlough income, means that we can take the vanilla and the spice,” he explained.
There is ‘no political appetite’ to reform stamp duty – Hollinrake
Speaking at the Kensington Mortgages webinar on the future of the tax, Hollinrake said there were “no easy answers” for any replacements, changes or alternatives.
He said: “I just don’t see it changing dramatically, I don’t think there’s a political appetite for it.
“I think it will be seen as a very risky move to do something very transformational or revolutionary.”
Hollinrake said any changes would still need to be linked to transactions to make it attractive to the government as the housing market was responsible for other parts of the economy.
He suggested a levy on land value or a proportional property tax based on current values to replace council tax.
However, he said it could create a North-South divide due to the differences in house prices. He also acknowledged that those who had their wealth tied up in their homes, such as the elderly, may be negatively impacted.
“I don’t think we can fiddle with it or make tweaks. If you are going to reform stamp duty completely it’s going to be painful in some areas; some people are going to benefit and some people are going to lose out,” he added.
Also on the panel was Josie Dent, managing economist at Cebr, who said she would like to see an increase in inheritance tax to make up for the losses of a stamp duty abolishment. She proposed this by saying inheritance usually came to people when they were in their 50s and had built up a significant amount of wealth for themselves.
Vicki Harris, chief commercial officer at Kensington Mortgages said any adjustments would need a country-wide debate.
“There are a number of different things we’re trying to solve at the same time and there is no perfect solution.
“We’ve identified enough problems with the current system that it’s the right time to step back now to look and see if we can do something better,” she added.
Hollinrake said it took the end of the current stamp duty holiday for any reforms to be seriously discussed.
“The industry should continue to engage with parliamentarians, and we should have discussions in Parliament. There will be lots of different people who have similar views to those which have been expressed on the panel.
“This Treasury will decide whether it sees the £4bn or £5bn that it’s cost for the raising of this threshold of stamp duty; whether it can afford to do that on an annual basis and whether it can get that back in the future. I think [the Treasury] will phase it back in like it said it will do, and then there will be a discussion within the Treasury about how we reform stamp duty.”
Kensington Mortgages upsizes green securitisation Finsbury Square to £750m
The deal saw strong demand from global investors, attracting 23 backers and being oversubscribed across all three tranches, Kensington said.
The senior notes were deemed as green because they aligned with the ICMA Green Bond Principles and were formally accredited by governance provider ISS ESG. This was the first transition from a lender in the UK asset-backed securities market to be labelled a green bond, and the third such in Europe.
The senior notes were priced at 65 basis points over SONIA, “reflecting strong investor demand for our residential mortgage-backed securities (RMBS) program,” the lender said.
The all-in pricing achieved a total cost of 70 bps for a funding duration of 4.6 years.
The lender’s Green Bond Framework provides for the issuer, Finsbury Square SPV, to finance purchase of a pool of loans by way of a term non-recourse securitisation of the underlying portfolio, which involves issuing securitised green bonds to investors.
Kensington said its target was to allocate £800 million of proceeds from the senior notes to develop its green lending products by 2026, as part of its commitment to sustainable lending.
The green range of products will aim to incentivise borrowers to buy energy-efficient properties or renovate existing buildings to improve environmental performance.
The lender’s Green Bond Framework requires that for properties to be eligible, they must have a minimum EPC rating of B, which puts them in the top 15 per cent for performance on emissions for residential buildings in England and Wales.
Alex Maddox, capital markets and digital director, at Kensington Mortgages (pictured), said: “The majority of UK housing stock is energy inefficient and responsible for 21 per cent of all carbon emissions in the UK. Improving the efficiency of our existing housing stock is one of the best ways to help the UK transition to a low-carbon economy.”
“Our Green Bond Framework reflects our commitment to invest in environmentally sustainable projects, help borrowers to reduce their carbon footprint, and to increase the amount of capital allocated to sustainable uses in the financial sector,” Maddox added.
In February, Kensington completed its £472 million GMG 2021-1 transaction. This year it became one of the first specialist lenders to collect EPC data from applicants and to share the information, at loan level, with investors for all new RMBS origination deals.
Last year, the lender launched its eKo cashback mortgage which rewards borrowers for making energy-efficient improvements to their homes.
The latest deal brings Kensington’s total RMBS issuance to £13 billion, the largest of any specialist lender.
Octane Capital and Kensington bolster BDM teams
Bleasdale joins from Zephyr Homeloans and will be covering the north of England. Kelman joins from Kensington Mortgage Group, is based in London, and will cover the south of England.
Octane offers a buy-to-let product with no stress testing and a pay rate starting at 3.99 per cent and is targeting first-time landlords, foreign nationals, multi-unit freehold blocks and houses in multiple occupation (HMO) among other non-standard structures.
Liam Lawlor, sales director, Octane Capital, said: “We’ve been bowled over by the level of demand from brokers for our buy-to-let product and have brought Emma and Dylan onboard to specifically accommodate it. They’re both highly experienced operators and know the market inside out so will hit the ground running.”
Kensington’s strategic growth
Meanwhile, Kensington Mortgages has appointed Neil Tribick as regional business development manager (BDM) for the North East.
Tribick has more than 20 years’ experience in the mortgage and financial services industry, joining from Furness for Intermediaries. Prior to this, he worked at Tesco Bank Mortgages, Castle Trust and Intelligent Finance.
As part of Kensington’s continued growth plans, in March, it made additional hires in the BDM and Business Development Unit (BDU) team. Kensington Mortgages also increased its underwriting team by 50 per cent over the past twelve months as part of plans to double its number of underwriters.
Craig McKinlay, new business director, Kensington Mortgages, said: “We are delighted to welcome Neil to the team. His past experience will be invaluable in his new role. As we complete the recruitment of our field sales team and continue to grow our BDU and underwriting support teams, our newly-filled North East role will be central to this strengthening presence.”
McKinlay said from May 17, the team of BDMs will be available for face-to-face broker visits in addition to video and telephone appointments.
Opportunities rife for advisers promoting advice on furlough and the self-employed – Kensington
In this exclusive video for Mortgage Solutions: High Street versus mainstream, our panel including Craig MacKinlay, new business director at Kensington Mortgages, Vikki Jefferies, proposition director at Primis Mortgage Network and Greg Cunnington, director of lender relationships and new homes, Alexander Hall debate the business drivers brokers could capitalise on this year.
Sponsored by Kensington Mortgages, McKinlay said as we come out of a recession, self-employment typically rises and at 15 per cent now, this will only increase.
“Work hard in this sector to get a good reputation and get out on social media and promote your skills on self-employed cases, said McKinlay.
Jefferies agreed, adding that infiltrating group and sector discussion forums like those of the IT sector is also a great way to work up a referral model, for example, groups debating the best way to tackle the IR35 tax status changes.
“I’m not saying brokers need to be tax experts, but if people are talking about something relevant to a sector like IR35, they will need mortgage advice, so don’t be afraid to ask for those referrals,” said Jefferies.
Self-employed as an obstacle
Cunnington said a lot of the self-employed cases that would have been waved through before the pandemic as vanilla are attracting more scrutiny now.
“We are seeing a lot of clients who think they won’t be able to get a mortgage or remortgage after all the negative stories about self-employed mortgages in the national press. But actually, if you talk to specialist lenders there are plenty of success stories out there,” he added.
It’s important that brokers promote their successes on social media and through case studies on the website to encourage this kind of personal referral activity, he said.
Watch the debate unfold below for more on the wins from manual underwriting, what brokers want from a business development manager (BDM) and Kensington’s moves into the Northern Irish market and its onward strategic lending plans.
Mansfield BS adds high LTV deals and Kensington cuts BTL rates
This deal is a two-year discounted product with a rate currently of 2.99 per cent. It has a £199 application fee and £800 completion fee and a two per cent early repayment charge (ERC).
It is available for loans between £100,000 and £350,000 across England, Wales and Scotland.
For borrowers looking to remortgage, a three-year discounted rate product up to 85 per cent LTV has been introduced.
It also comes at an initial rate currently at 2.99 per cent for loans between £100,000 and £350,000, has a £199 application fee and £800 completion fee and a three per cent ERC.
Free legal fees are available through the lender’s nominated solicitor for remortgages in England Wales only.
Head of mortgage sales Andy Alvarez said the new products would provide greater choice for individuals with modest deposits or equity.
“These new products help extend our reach across the UK at higher LTV and they are available to everybody,” he said.
Meanwhile, Kensington Mortgages has added two mortgages to its range and made rate cuts to its buy-to-let deals by up to 40 basis points.
The lender has introduced a two-year fixed residential mortgage at 70 per cent loan to value (LTV) priced at 1.99 per cent.
For landlords, it has added a two-year fix at 75 per cent LTV with a rate of 2.59 per cent.
The rates on its buy-to-let mortgages including limited company now start from 2.99 per cent for a two-year fixed at 75 per cent LTV.
For houses in multiple occupation and multi-unit blocks, rates begin from 3.39 per cent for a two-year fixed at 75 per cent LTV.
Craig McKinlay (pictured), new business director at Kensington Mortgages, said: “We’re delighted to offer rate reductions across our buy-to-let range and to have these new special rates.
“These will open up new opportunities for intermediaries and reinforce our commitment to helping borrowers who are underserved and undervalued by high street lenders.”
Scottish first-time buyers
The lender has also committed to honouring applications made through the Scottish Home Fund Scheme, despite its closure by the government.
The scheme was closed yesterday after just five days when it ran out of money. The first-time buyer initiative which provides loans of up to £25,000 only had a budget of £60m, down from the £200m that was available last year.
Kensington will continue to accept pre-existing or ongoing cases for the scheme.
Markets no longer expecting negative interest rates from BoE – Maddox
The BoE also held the total quantitative easing (QE) target at £895bn, with the pace of asset purchases remaining unchanged at £4.4bn a week.
Overall, the MPC’s “wait and see” approach continues, with the view that its next steps largely depend on the recovery of the UK economy.
To this end, we can expect further policy action if the markets worsen or inflation decreases below the two per cent target.
The MPC noted the positive attribution of the vaccine rollout and noted that the easing of Covid restrictions would increase the UK economy’s supply and demand over the coming months.
UK GDP fell by 2.9 per cent in January 2021, although this reduction was lower than expected and generally due to developments in public sector output.
However, GDP remains approximately 10 per cent lower when compared to Q4 2019, but had risen by one per cent in Q4 2020, which was slightly stronger than expected in the February report.
The 12-month Consumer Price Index (CPI) inflation measure rose from 0.6 per cent in December to 0.7 per cent in January, with a slight uptick attributed to recreation and culture.
The MPC suggested CPI inflation is expected to be above the BoE’s two per cent target by spring, as the effects of previous falls in oil prices will drop out of the annual comparative figures, reflecting recent increases in energy prices.
The February report does not account for Budget policy updates such as extending furlough, resulting in higher unemployment projections and latest Office for National Statistics figures indicate unemployment was at 5.0 per cent in the three months to January 2021.
No negative interest rates
The market is no longer expecting the BoE to cut interest rates below zero and expects the BoE base rate will increase to 25 basis points (bps) in two years and then to 50bps in three years.
Generally, interest rates have been on an upward trend across the curve, with two-year and five-year rates increasing by 14bps and 36bps respectively since the end of January 2021.
Forecasts for two-year swap rates will increase to 50bps in a years’ time and then 75bps in two years, with three-year rates predicted to reach 0.75 per cent in two years and then one per cent in three years.
Five-year rates are expected to hit one per cent in two years, with 10-year rates reaching one per cent in six months’ time and then 1.25 per cent in three years’ time.
At this stage, market participants believe the likelihood of further stimulus from the BoE is diminishing.
The MPC’s view is unchanged since the last meeting, in that the next steps will depend on the recovery of the UK economy.
There was an expectation previously that a negative rate would be imminent. However, the MPC has steered clear and is awaiting the UK’s recovery before proceeding with its next steps.
As such, looking ahead, the likelihood of a rate cut in 2021 is thought to be materially lower and markets expect the policy to remain unchanged for the current year and next year.
UK Securitisation Market
Primary markets were very active and healthy in February and March, with a flurry of new issuances from various mortgage lenders, including Together Money, Belmont Green, Paratus, Fleet Mortgages, Landbay and Yorkshire Building Society.
Together brought the first deal backed by commercial loans in 14 years and YBS the first UK prime deal since last summer.
We also saw an active pipeline of legacy trades with the £4bn portfolio sold by UKAR to the PIMCO/DK Partners/Citi consortium being refinanced, with seniors pricing at the very healthy print of S+80bps.
And both Trinity Square transactions were refinanced into a single £1.1bn deal with seniors at S+85bps.
Since the beginning of February, more than £7bn of UK residential mortgage backed securitisation (RMBS) paper has been placed on the market, evidencing a functioning market’s return.
Kensington bolsters BDM team
Maria has more than 20 years’ experience in financial services across the pensions and the mortgage industry and has worked with various lenders, including RBS, LMC, Aldermore and Together.
Andy joins from Clydesdale Bank and has a similar career spanning 19 years, where he has worked solely for Clydesdale in its commercial and private banking team over the last eight years as a BDM.
As part of Kensington’s growth plans, it also has two additional hires in the business development unit (BDU) and increased the underwriting team by 50 per cent over the past twelve months as part of plans to double the number of underwriters. Last month, Kensington also launched its live webchat to allow intermediaries to speak directly with BDUs online.
Craig McKinlay, new business director, Kensington Mortgages (pictured), said: “We are delighted to welcome Maria and Andy to the team. Both have a solid track record in managing network and intermediary relationships, which will be invaluable in their new roles. As we look to continue to grow our national accounts, field sales and business development activity, our newly expanded teams will be central to this push.
“Throughout last year, we remained fully operational, and these increases to our headcount mean we can continue to provide ongoing support to intermediaries.”
Maria Betti, BDM for South London, Kensington Mortgages, said: “Despite the odds, Kensington had a very strong 2020 and I look forward to working closely with the team in the year ahead.”
Andy Heath, BDM for East region, Kensington Mortgages, said: “Building lasting relationships with brokers and adding real value is the most rewarding part of the role and I am excited to join the team as Kensington continues to grow its national accounts.”