Kensington pulling out of sub-prime market (adverse mortgages)

UK007BullDog

Wow, anyone trying to get a mortgage with Kensington which is sub prime they better get their skates on. The entire Kensington adverse range will be withdrawn from close of business on Friday. To guarantee the current products adverse applications must be signed, dated and received by Kensington by close of business on Friday.

The lender will also be withdrawing its fixed rate specials and re-pricing its current core prime range by close of business on Friday with a new core prime range available from Monday.

So where are all those sub-prime customers going to go?

Leon_W

To hell in a handcart probably UK !

The merry-go-round of re-mortgaging from one subprime lender to another is most definately over. Borrowers falling off of introductory deals onto SVRs and LIBOR are pretty much stuck with their current lender with no chance of moving elsewhere unless their credit profile has improved dramatically.

Regards

mystic_trev

I posted this on the Housebuying Forum

http://www.mortgagestrategy.co.uk/cgi-bin/item.cgi?id=154613&d=11

As usual it will be the worst off - hardest hit. Goodness knows how many repo's we'll see next year?

luckyfool

I can't imagine there were many applications in the pipeline to Kensington anyway as they have already made their lack of appetite for adverse business clear in the last couple of months.

There are still homes for these sub prime clients at the moment as long as they have a little equity/a deposit. e.g. First National/GE Money are still agressively going after business and can do this as they are a balance sheet lender and have deep pockets. They will lend up to 90% without credit scoring it, or 95% if it passes a score.

The days of 95% and even 100% with very bad credit, lenders giving up to 7 times income to people with a poor repayment history are well and trully over though.

Subprime clients with a 10% or more deposit, and looking for sensible borrowing amounts should still be ok.

sarkin

This is looking like the begining of the end for sub prime mortgages, With Victoria closing over night, Infinity cant ket funding and now the biggest of them all pulls out of the market. A lot of sub prime brokers only have 5 or 6 lenders now they will have even less.

luckyfool

sarkin wrote: »

This is looking like the begining of the end for sub prime mortgages, With Victoria closing over night, Infinity cant ket funding and now the biggest of them all pulls out of the market. A lot of sub prime brokers only have 5 or 6 lenders now they will have even less.

Sarkin,

That's just daft. Firstly, Victoria were a niche bit part player. Kensington are far from the largest sub prime lender and their withdrawal from sub prime is temporary. Subprime lenders like Victoria and Kensington, who are reliant on borrowing money from the markets to lend, and then selling those mortgages on through securitisation are in deep trouble. Extrapolating that to the whole sub prime market and saying this is the end for sub prime mortgages is crazy.

As things stand the market is requiring a more prudent approach to lending, and a larger risk premium for sub prime clients. i.e. This is in contrast to the situation 6 months to a year ago where lenders were offering pretty daft mortgages (e.g. 95% to a first time buyer with a ccj 6 months ago for £10,000), and in some instances sub prime clients were able to get better rates than Prime clients. There are still big players out there with deep pockets, and also sub prime lenders owned by building societies, who can still operate and assist people with non-standard circumstances. The fact that rates are higher, and criteria has tightened will just mean that IMHO the market for sub prime mortgages will shrink by 20-40% compared to last year. It will definitely still be there.

sarkin

AS you say upto 40% of the market could shrink I would agree with you this is the beging of the end for sub prime. If some one has the odd default or CCJ you can go to salt or chelsea. but no one wants the reall mucky stuff now

luckyfool

The market shrinking is not the same as "the beginning of the end for sub prime". There are still millions of people out there who have had credit problems in the past, and while thats the case there will be mortgage lenders who will service that market. The lack of availability of cheap credit will mean that the deals available will be more expensive than in the past, and that the "worst of the worst" wanting 90-100% will be out of luck. But even people with very poor credit histories will be able to obtain a mortgage if the deposit is big enough. i.e. With a 25% deposit virtually anyone who isnt currently bankrupt would be able to source a mortgage.

sarkin

I think I am getting confused with packagers and sub prime

luckyfool

sarkin wrote: »

I think I am getting confused with packagers and sub prime

Possibly. Alot of packagers will go to the wall and there will definitely be consolidation amongst the survivors.

Dan_Collins_2

Doom and Gloom! LOL

We had Northern rock in the office this morning, I put a lot of business with them 1st and 2nd quarter of this year so I have a field underwriter looking after me. As far as they are conserned its biz as normal, they have poor rates due to the fact that they borrowed the BOE cash at a high rate. They still have good criteria and are living (Just) off of that!

Kensington dont need sub prime, I think you will see them slip in to the gap GMAC have left (Until they return). I have done a frew prime deals with them and they have been very good. I see this slump as a slump only as a broker if you can get through this you will come out stronger and crud gets left behind.

The problem this year is 3or 4 base rises, credit crunch, HIPS and HMO's all in one year!

Next year less will happen, less ricky business will be done (A good thing) and we will all live happy ever after!