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Kensington Mortgages (major Subprime Lender) Update

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I've just been emailed an update from Kensington mortgages as follows:

'Given current global capital market volatility, the cost of funding adverse credit mortgages is changing daily, as is investor appetite for mortgage portfolios. Kensington's view is that, in the short term, there will be NO INSTITUTUIONAL INVESTOR APPETITE for portfolios containing hight LTV adverse credit mortgages.

As a result of market conditions, we will be refocusing our resources in the short term on our Prime mortgage range and capping our adverse range at 75%, increasing adverse rates at the same time.

We will be looking out for the moment at which cost of funding starts falling again to ensure that Kensington products remain competetive in a changing market'.

MY VIEW:

This is the key subprime flag bearer and where they go others follow. Until now they did up to 95% for adverse credit mortgages and second charge loans.

Effectively overnight home ownership for a significant portion of the population has become a non option. Those that until now have remortgaged to get out of trouble will all of a sudden find the road ends at a Road Runner style cliff edge :o

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Are Northern Rock still dishing out 125%?

If they are one should be writing to the Bankrupt of England why they are propping up this turd of a financial institution with taxpayers money.

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The market has said house prices will fall at least 25%

Maybe next week it'll be saying 40%?

'We will be looking out for the moment at which cost of funding starts falling again'

Ha ha, I keep looking for Kylie to knock at my door but nothing yet :lol:

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Good!

Are Kensington independant?

Swallowed up by Investec, why the hell they'd want to do that is anybodys guess. Setting up a lender is a piece of cake compared to starting a proper business.

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I've just been emailed an update from Kensington mortgages as follows:

'Given current global capital market volatility, the cost of funding adverse credit mortgages is changing daily, as is investor appetite for mortgage portfolios. Kensington's view is that, in the short term, there will be NO INSTITUTUIONAL INVESTOR APPETITE for portfolios containing hight LTV adverse credit mortgages.

As a result of market conditions, we will be refocusing our resources in the short term on our Prime mortgage range and capping our adverse range at 75%, increasing adverse rates at the same time.

We will be looking out for the moment at which cost of funding starts falling again to ensure that Kensington products remain competetive in a changing market'.

MY VIEW:

This is the key subprime flag bearer and where they go others follow. Until now they did up to 95% for adverse credit mortgages and second charge loans.

Effectively overnight home ownership for a significant portion of the population has become a non option. Those that until now have remortgaged to get out of trouble will all of a sudden find the road ends at a Road Runner style cliff edge :o

Bang goes UK subprime, I am presuming if someone falls into the prime camp they may have enough caution not to be in the market for a mortgage anyway!

This is significant and will effect all providers, even if the BOE drops the base rate there is no one out there to securitize these mortgage too, the system is broke. The mortgage companies are between a rock and a hard place with current market prices.

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Kensington mortgages increases loan to value for sub-prime business to 75%. Kensington Mortgages has revealed that it will focus its resources on prime rather than sub-prime whilst the current market volatility continues...

Kensington has:

capped its sub-prime mortgage range at 75% LTV,

increased rates across its adverse range

and reduced rates on prime self-cert and buy-to-let products.

The current global capital market volatility means the cost of funding adverse credit mortgages is changing daily, as is investor appetite for mortgage portfolios. In the short-term, there will be no institutional investor appetite for portfolios containing high LTV adverse credit mortgages.

In an attempt to take advantage of the market when it recovers, Kensington took a decision to refocus its resources in the short-term on its range of prime mortgages and cap its adverse range at 75% LTV, increasing adverse rates at the same time.

http://firstrung.co.uk/articles.asp?pageid...articlekey=7515

Edited by Converted Lurker

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Couldn't resist digging this out

"Lenders are changing LTVs all the time, but we haven't seen anything drastic, like a drop to 75 percent which would be the case if there was market fear," said Darren Crook, head of mortgages at Moneyfacts.co.uk, a price comparison service.

from here

GMAC made a similar move a few wks back, but changed thier minds the next day. I expect some lenders will follow; it demonstrates just how crude risk assessment is in the mortgage industry imo.

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Couldn't resist digging this out

from here

GMAC made a similar move a few wks back, but changed thier minds the next day. I expect some lenders will follow; it demonstrates just how crude risk assessment is in the mortgage industry imo.

this is where a huge disconnection lies between the market traders and the real world and Kensington know it. They are attempting to re-price prodcuts based on what the market will buy. However, who would choose Kensington with their rates over, for example, Abbey or HBOS for prime business? They won't be able to sell enough prime business to punters so IMHO this strategy is deeply flawed and my hunch is that they know they're dead in the water - other than squeezing their current loan book of customers until they bleed <_<

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this is where a huge disconnection lies between the market traders and the real world and Kensington know it. They are attempting to re-price prodcuts based on what the market will buy. However, who would choose Kensington with their rates over, for example, Abbey or HBOS for prime business? They won't be able to sell enough prime business to punters so IMHO this strategy is deeply flawed and my hunch is that they know they're dead in the water - other than squeezing their current loan book of customers until they bleed <_<

I wonder how many BTL investors know what a margin call is. :lol:

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The comment about bleeding their existing loanbook dry is a good one.

A lot of KMC and GMAC money is made on the back of repos when customers get into arrears within the initial rate period.

They have an early repayment charge of around 6%, interest on the defaulting payments and I would some sort of extras they charge, particularly for their "Debt Counsellors" (so how do you feel about owing us this money? A lot worse now you have slammed my nose onto the table).

So in a, shall we say, "static" market, they are going to need to reduce LTV in order to get this cash back and maintain their profits.

And of course they are hastening the arrival of the repos by putting up their SVRs (not entirely their fault obviously).

As mentioned before by another poster, it means that the market are pricing up to a 25% fall in some prices, presumably in sub prime areas.

Stool kicked away, body swinging, rope creaking.

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Effectively overnight home ownership for a significant portion of the population has become a non option. Those that until now have remortgaged to get out of trouble will all of a sudden find the road ends at a Road Runner style cliff edge :o

Sorry, but how does this change matters?

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Sorry, but how does this change matters?

Yesterday a subprime borrower needed £10,000 in savings to borrow £190,000 and purchase a house for £200,000.

today they need £50,000 to be able to borrow £150,000 to purchase the same house.

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http://www.mortgagestrategy.co.uk/cgi-bin/...;h=24&f=254

"It has therefore capped its sub-prime mortgage range at 75% LTV, increased rates across its adverse range and reduced rates on prime self-cert and buy-to-let products."

:(

Don't worry, hardly market beating rates!!

http://www.kmc.co.uk/KMOnline/PDFs/SpecialistPrimeRates.pdf

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Yesterday a subprime borrower needed £10,000 in savings to borrow £190,000 and purchase a house for £200,000.

today they need £50,000 to be able to borrow £150,000 to purchase the same house.

ie.... no chance virtually.

Only people with significant equity in the property will be able to get one of these mortgages.

Generally, if you are sub prime, you don't have much in the bank..... so sub prime new deals are toast. People swapping houses from one subprime to another matters not a lot for the market i would guess.

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Sorry, but how does this change matters?

I think the point is that sub prime MEWers, and movers for that matter have had the door shut in their faces, since they are going to have to leave 25% of their home's value in the home in order to get a mortgage.

This equates to a drop in demand. Drop in demand means a slowing of the house market.

To use a simple analogy, it is like expecting a boiling kettle to carry on boiling once you switch it off. Hope that doesn't sound patronising.

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*sigh*

What I meant is a singificant proportion of the populace ALREADY sees owning property as a non-starter, hence...

How does this change matters?

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