Competition hits Kensington

Kensington Group has admitted its first charge mortgage business has been hit by increased competition but says it remains optimistic about the second charge and Irish markets.

In a trading statement issued by Kensington last week, it revealed its pre-tax profits for 2006 are likely to be towards the lower end of analysts’ expectations because of a decline in the value of new business lending in the UK’s first-charge mortgage market.

It attributes this to reduced margins and lower income from early redemption charges.

Following the statement posted on the London Stock Exchange on November 22, Kensington shares took a tumble from 905p to 805p, and at the time of going to press were at 764p.

John Maltby, chief executive officer at Kensington, says: “Kensington is the only independent lender in the specialist mortgage market listed on the LSE. The company was promoted to the FTSE250 in 2005 and continues to be recognised industrywide for its innovation and outstanding service.

“Kensington has continued to grow its lending in its core market and its growth is set to continue as it successfully diversifies its product range and strategic partnerships while it develops the right technology to meet market needs in the UK and Europe.”

Despite the surge of new entrants during 2006 and continuing competition from existing lenders, Kensington chose to maintain prudent lending policies and manage margin reduction in its first charge business.

As a result, new business completions in UK first charge mortgages for the 11 months to October 31 have been 7% higher than the same period in 2005.

The statement also shows that Money Partners and Start Mortgages delivered strong growth over the period, with new business completions over 100% ahead of the same period in 2005.

But Kensington’s direct to consumer business TML Mortgage Solutions delivered low volumes of mortgage completions, only generating 5% of new business over 11 months. Kensington is reviewing TML’s business model including growth opportunities for its broker facility.