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Kensington wants proof that clients’ repayment vehicles are performing

Kensington has written to a number of brokers asking them to provide evidence that certain clients’ repayment vehicles are on track to pay off their interest-only mortgage.

The lender says it has picked a handful of brokers at random and has decided to carry out the exercise to help with its future decision making.

Tom Cleary, financial services director at Start Mortgages, is one of the brokers who has received a letter.

His client has an interest-only mortgage with an ISA/savings plan as the repayment vehicle.

The letter says that as part of Kensington’s responsible lending obligations it is reviewing interest-only cases to ensure the repayment vehicle is operating as intended.

It asks the broker to provide documentary evidence in 14 days that the customer’s saving plan is on target and confirmation of the payments made into the plan.

Cleary says the move is likely to be a result of proposals in the Financial Services Authority’s Mortgage Market Review, which specify that lenders must check on the repayment vehicle of the mortgage at least once during its term.

But he says the responsibility for that lies firmly with the lender, not the introducing broker.

He says: “As a firm, we are not even authorised for savings or investments, so I would not imagine the regulator would be satisfied with the validity of any guarantees we make on behalf of the client.

“So long as the lender has robust checks in place at point-of-sale and the intermediary has satisfied these prior to the mortgage being offered, the responsibility to check the repayment vehicle from there on must remain with the lender.”

Nevertheless, he says it is only right that Kensington wrote to brokers as it is them who introduce the clients.

A spokesman for Kensington says: “We have no immediate plans to change our policy on interest-only and are carrying out the exercise to help with our decision-making process and to educate us.

“Our relationship is with brokers which is why we have written to them.”

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