Type: Fixed-rate mortgage
Fixed term: Three years
Fixed rate: 6.79%
Minimum loan: £25,001
Maximum loan: Up to 70% of valuation subject to a maximum of £350,000
Income multiples: Based on affordability
Conditions: Not available to first-time buyers, up to two CCJs in the last two years up to a £750 maximum but must be satisfied for more than six months, up to two month’s default in the last two years but none in the last six months, no arrears in the last two years, bankruptcy and IVA not acceptable
Arrangement fee: £1,499
Redemption fee: 5% of the amount repaid in the first three years
Introducer’s fee: 0.4% of the original loan
Tel: 0800 111 020
This fixed-rate mortgage from Kensington is available to borrowers who have experienced a financial blip during the recession, found their feet again, but are prevented from getting a mortgage because their circumstances do not meet the credit scoring criteria of many lenders. It will consider applicants who have had up to two CCJs within a total maximum of £750 as long as they have been satisfied for more than six months. Borrowers are also allowed two unsecured defaults in the past two years, as long as there have been none in the past six months.
Belgravia Insurance Consultants consultant Paul White says: “Kensington was renowned for its flexible approach to underwriting and perhaps the best feature of this product is that the borrower is individually assessed, rather than by a web-based credit score system, which can lead to some perverse declineatures.”
White says Kensington is one of few remaining lenders that consider the self-employed, with a short 12-month trading record.
“Secondary sources of income may be factored into affordability, as sometimes personal pensions are not with other lenders.,” says White.
He points out that the completion fee is a flat rate of £1,499. On maximum lending of £350,000, this fee is the equivalent of 0.42 per cent of the loan. White feels this is very competitive relative to deals where fees are based on a percentage of the loan amount. “The completion fee may be added to the loan, even if it breaches the 70 per cent LTV limit,” says White.
Turning to the potential drawbacks of the products, White says: “As the State is delaying the retirement age, it seems strange that Lenders are not taking a more flexible attitude to lending into retirement. As this is a credit repair product, the ability to reschedule debt into retirement is one way to make a clean start.”
He also thinks it would be helpful if shared ownership properties were allowed, as the marginal borrowers who got onto the housing ladder through this scheme may be the ones requiring credit repair.
“Few brokers and fewer estate agents are specialists in type of concrete. The fact that some forms of it are allowed and others not, means that a survey has to be paid for, with the danger of mundic block materials being present.” Mundic blocks are concrete blocks made with mining waste that were used to build homes particularly in Cornwall and Devon between 1900 and the early 1950s. The blocks contain minerals that can weaken the concrete, so mortgage lenders insist that properties are tested to ensure they are not affected.
White also dislikes an element of the valuation fee. “The valuation fee includes a £100 non-refundable administration charge, which must be notified to the client by the broker.”
Following the end of the selected fixed period, White observes that the product reverts to 5.1 per cent above Libor. “This is quite sophisticated for some borrowers, so the broker needs to be cautious that the client’s previous credit problems were only a blip,” he says.
White says that as Kensington is often a lender of last resort, depending on the borrower’s circumstances, there may be no competing Lenders.
Summing up he says: “Overall, I am still glad that Kensington are present in the market There is an extremely limited number of lenders in the credit repair arena. Kensington is still exercising caution in limiting the LTV and the number of CCJs and defaults from the past two years. Overall, I am still glad that Kensington are present in the market.
Suitability to market: Good
Competitiveness of rate: Average
Adviser remuneration: Average