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.”
Kensington relaunches 90 per cent LTVs through packagers
The lender has also increased the LTV on select, core and environmentally friendly eKo mortgages accessible by brokers up to 85 per cent LTV and relaunched Right to Buy products at 75 per cent LTV.
The packager-only products come a month after the lender’s new business director, Craig McKinley, confirmed it was considering a return to the high LTV market this year.
There are four mortgages in the range, including a two-year fix with a £1,299 fee at a rate of 5.29 per cent and a five-year fix alternative with a rate of 5.99 per cent.
Fee-free options include a two-year fix with a rate of 5.84 per cent and a five-year fix at 6.29 per cent. The fee-free products have free valuation and legals or £250 cashback for remortgages. They are available for borrowing amounts between £25,000 and £1m.
In the broker accessible deals up to 85 per cent LTV, the two-year fix mortgage in its core offering has a rate of 4.49 per cent at 80 per cent LTV with a £999 for purchase and remortgage while the five-year fix is set at 4.89 per cent.
Additionally, Kensington Mortgages has added 80 and 85 per cent LTV buy-to-let mortgages to its core range with rates beginning from 4.39 per cent for a two-year fixed purchase and remortgage product.
Markets predict negative rates in 2022 despite six-month warning – Maddox
The BoE also held the total quantitative easing (QE) target at £895bn.
The MPC gave a hawkish tone, with the biggest takeaway being that the committee agreed to give lenders a six-month notice period to prepare for negative interest rates – the first time in its history. This suggests that August 2021 could be the earliest date where negative rates can be expected, by which point there are hopes that the UK economy may be able to reopen.
However, the MPC also highlighted that “this did not mean that negative rates were on the way” – so the position is speculative in any event. The BoE has been studying the case for negative rates for almost a year.
Economic recovery by 2022
UK GDP figures out today have risen slightly by one per cent in Q4 2020 compared to the previous quarter, but this is still 7.8 per cent lower than Q4 2019.
Despite avoiding a double dip recession – the total UK economy shrunk by almost 10 per cent in 2020 – the largest contraction in 300 years.
While the MPC expects UK GDP to contract by around four per cent in Q1 2021 due to the lockdown measures, it is projected that it will bounce back strongly in the months after.
The MPC noted GDP is projected to recover rapidly over 2021, as the vaccination programme will lead to easing of Covid restrictions and health concerns, with a 7.25per cent annual rise in 2021.
The MPC expects UK GDP to return to its pre-COVID levels in early 2022 rather than late next year.
It also indicated that the recovery in spending would be stronger because of consumers building up cash during lockdown. Between March and November 2020, households held over £125bn more cash than they usually would, according to the BoE.
Twelve-month CPI inflation rose from 0.3 per cent in November to 0.6 per cent in December. The weakness of recent outturns largely reflects the direct and indirect effects of Covid-19 on the economy.
CPI inflation is expected to be above the BoE’s two per cent target by Q1 2022, as the reduction in VAT for certain services comes to an end.
Despite the extension of the furlough scheme, the latest ONS figures show unemployment has hit a four-year high at five per cent and a further increase in unemployment is projected over the next few quarters.
Negative rates delayed
The market is expecting the BoE to cut interest rates below zero next year, for the first time ever. The market expects that the BoE base rate will fall to negative 25 basis points (bps) in 12 months’ time and return to zero in two years’ time.
Forecasts for the two-year rates and three-year rates will fall to zero and then increase to 25 bps in twelve months’ time.
Five-year rates remain at 25bps for the next two years and are expected to increase to 50 bps in three years, and 10-year rates to remain at 50bps for two years, then increase to 50bps in three years’ time.
Market participants believe at this stage, given that UK growth is in line to return to pre-pandemic levels, that the likelihood of further stimulus of the BoE is diminishing.
The MPC has reviewed its negative rate policy and highlighted that it is “not warranted by the current conjuncture and the outlook”.
Looking ahead, the likelihood of a rate cut in 2021 is seen as materially lower. For now, markets forecast the policy to remain unmoved this year and next.
UK Securitisation Market
The UK residential mortgage-backed securitisation (RMBS) market strongly reopened with the issuances of three transactions to date – all from specialist lenders.
We expect the pipeline for UK prime paper to remain dry as high street banks continue to benefit from cheap funding from the BoE via the term funding scheme (TFS) launched last year.
Kensington brought the first labelled environmental, social and corporate governance (ESG) bond in the UK RMBS market at the beginning of February.
This is a landmark transaction hopefully set to be followed by other social bonds as the securitisation market catches up to other capital markets which have more readily adopted ethical frameworks.
TSB cuts high LTV rates and Kensington relaunches Help to Buy range
The two-year fixed first-time buyer and homemover mortgages at 80-90 per cent LTV have been reduced by 0.15 per cent. The product at 80-85 per cent LTV now has a rate of 2.59 per cent and at 85-90 per cent LTV, the rate is 3.34 per cent.
Five-year fixes with three year early repayment charges (ERCs) for first-time buyers and purchases have seen reductions of up to 0.25 per cent.
Rates begin at 2.24 per cent for borrowing up to 60 per cent LTV and 4.04 per cent for loans of 85-90 per cent LTV.
Five-year fixed remortgages up to 75 per cent LTV with five year ERCs and £1,495 fees have had rates reduced by up to 0.15 per cent.
Kensington relaunches Help to Buy
Kensington Remortgages has brought back its Help to Buy mortgages with two and five-year fixes at 75 per cent LTV.
This includes two two-year fixed products, one for purchase and the other for remortgage, both with rates of 4.54 per cent. The five-year options have rates of 4.99 per cent.
The products have fees of £999 and have free valuations. They are available for loan sizes between £25,000 and £500,000.
Kensington completes £472m eco-friendly securitisation
The bond aligns with the ICMA Social Bond Principles of 2020 which indicates proceeds of bonds should be used to fund new and existing projects with positive social outcomes.
As part of this, Kensington Mortgages contributed towards the United Nations Sustainable Development Goals, a non-profit coalition agenda which sets out targets to improve sustainability.
The securitisation also follows the launch of the lender’s first green mortgage, eKo Cashback, last year.
The issuer Gemgarto SPV will finance the purchase of the loans through a term non-recourse securitisation, which is secured against the properties held in the portfolio and issue the social bonds to investors.
The deal gained from 28 investors across four tranches.
Alex Maddox, capital markets and digital director at Kensington Mortgages, said: “We’ve started the new year in a very strong position.
“With the successful pricing of our first securitisation of 2021, it marks Kensington as the first specialist lender to issue social bonds in the UK residential mortgage backed securities (RMBS) markets.”
He said the lender was continuing to introduce environmental, social and corporate governance (ESG) initiatives into its business and provided EPC data for the properties held in the recent securitisation.
“Last August, we publicly released our ESG targets for the current financial year for the first time – again making us the first specialist lender in the UK to publish such an initiative.
“These will be reviewed on an annual basis so that we can publicly report on the progress we are making in each area – and our targets will help ensure that we are creating a positive impact in both the workplace and wider world.”
Kensington eyes new-build products, return to high LTVs and expands support teams
Self-employed borrower evidence requirements and returning to previous higher loan to value (LTV) limits are also on the cards for the next 12 months, the lender revealed.
Speaking during its webinar, new business director Craig McKinlay (pictured) said the lender had been investing in the business including hiring 40 new people since the pandemic hit, with a focus on business development teams and underwriters.
“We’ve got big recruitment plans especially for underwriting so we can support brokers as best we can and get back to really good service levels,” he said.
“We want to enter new markets this year as part of our growth plans.
“There’s some new build areas we’re not in at the moment on first charge – things like shared ownership, bank of mum and dad propositions, there’s some interesting possible replacements for Help to Buy we’re looking at, so watch this space.”
Earlier in the webinar Legal and General Mortgage Club head of lender relationships Danny Belton and Knowledge Bank CEO Nicola Firth both argued lenders should be taking a more pragmatic and recent look at self-employed borrowers’ businesses.
McKinlay appeared to acknowledge the need to address that and added that Kensington was planning to do lots of work on the self-employed proposition.
“We need to think … normally we’d take one year’s accounts, is that still the right thing to do?” he said.
“Should we be looking to change that, bearing in mind some people will have been hit by Covid, some will have become self-employed?”
McKinlay added: “We’ve always done lots of high LTV lending – typically we’ve done a lot of 90 per cent and some 95 per cent, so we’d like to get back to those levels.
“And we’d like to get back to buy-to-let at 80 per cent and 85 per cent which we did pre-Covid-19.”
Lenders must underwrite self-employed borrowers ‘on current business levels’ – Belton and Firth
Speaking on a Kensington Mortgages webinar, representatives from both organisations said a more up-to-date approach was the fairest way to treat self-employed borrowers.
Knowledge Bank CEO Nicola Firth (pictured) said: “I’d like to see from lenders a lot more focus put on current business levels rather than looking back retrospectively.
“I don’t think the retrospective look over the past year, two years or three years is going to reflect fairly on that self-employed person or their business.
“So I would like to see underwriting done with a clear view of where that business is now, and how its performing.”
Legal and General Mortgage Club head of lender relationships Danny Belton added: “I agree with Nicola, let’s deal with these customers in a different way, let’s not be too retrospective.
“We’ve learned we can start to look at them in the here and now and how do we project that going forward.”
Lenders took cheap money
On the subject of firms using the government’s bounce back loans or self-employed income support scheme (SEISS), they added that this was similar to the mortgage payment deferral setup.
“How many people took them because they absolutely needed them and how many people were opportunism thinking it’s cheap money?” Firth said.
“How do you treat those people? One size does not fit all. And if someone is using cheap money to pay off a more expensive loan they’re being quite savvy with their business.
“It’s very difficult and nothing but manual underwriting is going to get through that.”
Belton also noted that lenders had been on the receiving end of cheap funding as well and it maybe unfair to hold it against firms doing the same.
“Lenders were very happy to take very cheap money from the government if they could access the relative scheme there, so businesses are doing the same thing there, whether they need to or not,” he continued.
“They’ve just taken it because they can, the same as people taking payment holidays because they can. It’s just allowed in the rules, so is it right to include those in the affordability calculation?
“Ultimately there will be an outgoing and an income, that’s what you’re going to use as basis for assessment.”
Advice needed more than ever
The pair were joined by Kensington Mortgages new business director Craig McKinlay and they agreed that overall the self-employed market was likely to grow and that advice and manual underwriting would be vital.
“I think its going to be really positive in the future, I think there will be more self-employed, that’s what we saw in the last recession,” McKinlay said.
“There’s a really big opportunity for brokers. People need advice more than ever, the more complex the market the harder things get, the more people need advice.”
He added: “Things are changing very quickly but it is a very good opportunity and it’s a real opportunity.”
Kensington withdraws core residential mortgages and raises minimum loan size
The lender has also increased its minimum loan size to £80,000 and removed all right to buy products.
Craig McKinlay, new business director, Kensington Mortgages (pictured), said: “We have seen a strong increase in demand and delivering a high standard of service to our brokers is important to us.
“To continue to do this, we have temporarily withdrawn some of our product range due to the high volume of applications and to manage our service levels. We are constantly keeping our products under review and will notify our brokers as soon as possible when we relaunch these.”
It comes as Kensington launches in Northern Ireland, which takes the specialist lender’s coverage to the whole of the UK.
The lender said it will be offering both its residential and buy-to-let deals to brokers in Northern Ireland.
Deals in these ranges go up to 75 per cent loan to value with rates starting from 3.29 per cent.
The expansion comes ahead of Kensington celebrating its 25th birthday in 2021.
McKinlay added: “Although a small market, the Northern Ireland mortgage space has been growing over the last few years.
“Northern Ireland is also home to a rising population of self-employed workers, new business owners, and entrepreneurs. However, despite this growth, the market has not kept up with the evolving needs of these borrowers, who do not fit traditional lending criteria.
“The space is dominated by high-street banks and building societies – so there is an opportunity here to provide specialist, flexible solutions that do not currently exist.
He added that after launching in Scotland two years ago, expanding into Northern Ireland was the next step.