Kensington withdraws from sub-prime mortgage market

Kensington Mortgages is withdrawing from the sub-prime mortgage market.

The lender specialises in adverse credit, self-certification and buy-to-let mortgages and has announced that it will discontinue its entire “Adverse” range at close of business today.

The company, which was acquired by Investec (the South African bank) in August of this year, is also undertaking a review of its mortgage range and will be re-pricing some of its prime mortgages.

Other products, such as self-certified buy-to-let mortgage for first-time buyers, will be discontinued.

Kensington has been a pioneer in the UK sub-prime mortgage sector, but the events of this summer have already led to the company reducing its loan-to-value ratio to 75%.

It has been forced to act further because of “a lack of appetite among investors for portfolios of adverse debt”.

The news follows coverage this week of the plight of Paragon, the buy-to-let lender which, like Northern Rock, relies heavily on the wholesale money markets for its funding, rather than deposits.

Paragon has been forced to put in place an emergency equity financing arrangement, with UBS.

At this stage, analysts are predicting that the company could be forced to wind down its business, or even put itself up for sale.

Discuss this in the Finance Markets forums

Story link: Kensington withdraws from sub-prime mortgage market