In the spotlight
With Kensington Mortgages
Craig McKinlay
New Business Director, Kensington Mortgages
Robert McCoy
Senior Product & Business Manager, TMA Club
Rob McCoy, TMA Senior Product & Business Manager, recently met with Craig McKinlay, New Business Director, Kensington Mortgages, to understand more around their Flexi Fixed for Term mortgage, which was recently launched to the market.
RM: We recently saw Kensington launch a brand new product to the market, the ‘Flexi Fixed for Term’ Mortgage. Why has Kensington chosen to offer a ‘Flexi Fixed for Term’ Mortgage for customers?
CM: There is a couple of significant driving factors in our desire to offer a Flexi Fixed for Term product, driven by what we’ve seen, and continue to see, in the U.K housing market.
We’re witnessing first time buyers struggling to get on the housing ladder, hampered by ever growing deposit requirements and affordability limitations, so, for many, unless they have the ‘Bank of Mum & Dad’ available to them, the first step onto the ladder has become harder to achieve.
We’re also in a market of historically low interest rates. Whilst the base rate has recently increased to 0.25%, it is still well below the 4% average over the past 30 years, as well as being significantly lower than the Bank of England’s 2% inflation target. With Swap Rates increasing, leading to the cost of borrowing for lenders growing, as well as consumer costs continuing to rise in areas such as Petrol, Food and Energy, the Flexi Fixed for Term product removes the risk for borrowers of being impacted by fluctuating and rising interest rates.
In addition to this, it gives borrowers greater choice as there is the potential for customers to benefit from a significant affordability boost due to term certainty of payments this product provides.
RM: You’ve mentioned an affordability benefit to borrowers. Are you able to elaborate on this and provide us with further detail?
CM: First of all, the affordability assessment is based on the fixed interest rate of the product for the term of the mortgage, as opposed to a stress tested future variable rate that applies to standard 2 and 5 year fixed rates for example. Many clients may therefore be able to borrow more as a result of this different assessment, a significant benefit for first time buyers or those looking to buy a more expensive property.
One of the most significant challenges first time buyers face is maximising their borrowing potential whilst having a 5% or 10% deposit. House price inflation continues to far exceed that of young people’s wages, so for many looking to get onto the housing ladder this dream has become almost impossible.
The Flexi Fixed for Term product provides a solution to this, as affordability is enhanced, in some instances up to 6x income, whilst providing borrowers with loans up to 95% LTV, or 90% for New Build houses and 85% for New Build flats.
At the heart of this product is security and being able to plan and budget for the long-term.
RM: So who is the Flexi Fixed for Term product available to?
CM: The features of the Flexi fixed for Term offer benefits and solutions for a number of potential borrowers, so it is available for both first time buyers and second time buyers, who may be looking for an affordability boost as well as the ability to budget for a longer period. The Flexi Fixed for Term is also available for customers looking to remortgage up to 85% LTV, providing them with longer term certainty of payments in a rising rate environment.
With the end of the extremely successful Help to Buy scheme fast approaching, the Flexi Fixed for Term product is also available up to 90% LTV for new build Houses, and 85% LTV for new build flats, providing yet another solution from Kensington for borrowers looking to buy a brand new property following our recent Shared Ownership launch.
RM: TMA members and their clients may have concerns about being tied to a product and a lender for the term of the mortgage, and any potential fees to move away from this should their circumstances change. What has Kensington done to mitigate this?
CM: That’s a really good question Robert, and something we worked on with our funding partners during the development of this product to ensure
it catered for life events. After all, it’s near on impossible to predict what will happen in the next 10 years, let alone 40, which is the maximum term available on this product.
No early repayment charges apply if selling the mortgage property and/or moving home, irrespective of whether the customer’s new mortgage is taken with Kensington or with another lender. This flexibility is fantastic for first time buyers who may use our enhanced affordability to get on to the housing ladder initially, and when the time comes for them to upsize, they are free to leave Kensington if that is the best advice for them at the time.
Should a critical illness and/or death occur during the term of the product there will also be no Early Repayment Charges. Overpayments are allowed up to 10% per calendar year of the original balance, providing flexibility for customers to reduce their balance via lump sums from bonuses, inheritance etc. and, in addition to this, they can also redeem the entire mortgage balance with ERC at any time after 12 months of the mortgage completing.
Furthermore, if a client would like to borrow more money, they have the ability to apply for a further advance for essential home improvements, with this option again available after 12 months, subject of course to affordability and lending criteria being met.
RM: It’s really pleasing to see the benefits of the Flexi Fixed for Term whilst also acknowledging that life happens, so it’s important to see there is flexibility for our members’ customers.
You’ve mentioned this new product is subject to lending criteria, how does this differ from your ‘standard’ criteria?
CM: The criteria is slightly different to our usual requirements that TMA members will have become accustomed to over the years, so it is important that they understand and clarify what these differences are prior to submitting an application. One aspect that remains central to Kensington is that we still don’t credit score any case, and lending decisions are made by a human underwriter that you can talk to.
From a credit perspective, we need clients to have had no defaults or secured loan arrears in the 36 months prior to application, and no County Court Judgments in the previous 72 months. We are able to ignore Communications defaults as well as small utility defaults.
We would also need there to be no Pay Day Loan / Short Term Loan activity from the customers in the past 24 months, and the same applies for Unsecured Loan arrears. We would need 24 months with no missed payments, and for the accounts to be up-to-date at the time of application.
This product isn’t available to customers in an active Debt Management plan or if they have been subject to an IVA, Bankruptcy or Repossession.
For self-employed customers, we will need a 2 year trading history, and affordability will be calculated using either an average of their last 2 years’ accounts or their most recent year, whichever is lower, and for employed customers they will need to have been with their current employer for a minimum of 12 months at the time of application.
RM: Plenty of detail there, thank you! It goes to show there is an abundance of flexibility to support customers depending on their personal circumstances, allowing them to benefit from the features of the Flexi Fixed for Term product. Are there any other details our members should know about?
CM: There are Robert. Firstly, we are paying an enhanced procuration fee on completion for Flexi Fixed for Term customers. Members should check the TMA website for details.
In addition to this, there is also the flexibility to port the mortgage should the customers move at any time after 12 months from the initial completion, subject to affordability and meeting criteria at the time, and an enhanced procuration fee would be payable in this instance as well.
As with our existing residential products and criteria, we will accept family gifts from an acceptable family member towards a deposit, and will also continue to allow up to 5% Builder’s contribution towards deposits for new build purchases too.
For details of rates and options available, the full product range can be seen on our website.
RM: Finally, if one of our members at TMA thinks they have a customer who will benefit from the Flexi Fixed for Term product, or indeed any other areas of Kensington’s proposition, how should they get in touch to discuss a case?
CM: First of all, I’d advise them to contact TMA’s helpdesk! We’ve worked closely with TMA for a number of years, delivering regular training and updates to ensure their knowledge of our proposition and criteria is second to none, so you should definitely make that call!
From a Kensington perspective, we have a number of different ways that advisers can contact us, depending on their preference.
We have a Robochat feature on our website, which is available 24 hours a day and is programmed to answer more than 1,300 more simple enquiries. This supplements our business development unit, who can also be contacted on 0800 111 020 for more complex queries. We also have a live web chat feature to further support you.
And of course, we have our fantastic team of Business Development Managers covering the entire of the U.K. TMA members can find the contact details for your Local BDM on our website, and they will be more than happy to discuss in greater detail how our proposition can benefit you and your customers and help you write more business, whether that be virtual, or face-to-face over a cuppa, just like the good old days!
