Bad Credit Lender Mortgage

SUB PRIME LENDER SEES BAD DEBTS DOUBLE IN A YEAR

Bloomberg has reported that bad debts doubling at the (mainly sub-prime) lender Kensignton mortgages has caused an 11 percent drop in their share price in early morning trading.

Mortgage lender Kensington Group's shares plunged 11pc this morning after it warned that bad debts doubled in the first half of the year and that it was suffering from increased competition.

Bad debts at the company, which lends to borrowers with below-average credit records, jumped to 24.5m in the six months to May 31, from 11.3m a year earlier.

Chief executive John Maltby said: "We do not expect market conditions to get any easier during the rest of the year." Kensington shares fell 118 to 910p in early trading.

Stuart Duncan, a London-based analyst at Numis Securities who has a "sell" rating on the stock, said: "There has been a big jump in the bad debt charge.

Borrowers warned not to rush in wake of interest rate hike

Leading mortgage lenders have warned against the temptation of fixed rate deals, in the wake of the Bank of England's interest rate rises.

Those seeking bad credit mortgages or lifetime mortgages might opt for a deal where interest rates were guaranteed to remain the same over time. This is as opposed to a tracker mortgage, which would correspond to changes in base rate as governed by the Bank of England.

Interest rates went up to 4.75 per cent last Thursday, but Ray Boulger, spokesman for independent mortgage provider Charcoal, told Reuters that this it was not necessarily a good idea to go for a fixed rate loan: "If base rates are going to go above five percent and stick there for a while, then it makes sense to take a fixed mortgage.

"But if it is not going to go over five percent, and I don't think it will, then a tracker mortgage makes far more sense," he continued.

Low rates forcing mortgage fee rises

According to a report from MoneyExpert.com, the cost of applying for a mortgage has risen by almost a quarter in the last 12 months alone. The research suggests that mortgage lenders are trying to remain profitable whilst at the same time provide market-leading products to customers when even the rates on bad credit mortgages are relatively low. The average fixed-rate home purchase loan arrangement costs £494, up 22 per cent, MoneyExpert.com says, while the arrangement fee for a discount mortgage currently stands at £407 – an increase of 15 per cent from 12 months ago. "Borrowers need to budget for application fees when they take out a mortgage," said Sean Gardner, MoneyExpert's chief executive. "What you believe is a cheap deal saving you, for instance, £100 a month won't look quite so good when you add on application fees." Mr Gardner noted that because the base rate of interest had remained unmoved for almost a year, mortgage providers were looking at new ways to maximize their profits on fixed-rate products.

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