Leader: Sub-prime remains on ice

Brokers cheered the news last week that Kensington is to consider customers who have had County Court Judgments or defaults registered in their name in the past two years.

Many quickly lauded the move as the return of sub-prime but Kensington was equally quick to emphasise that the new range was anything but, and that it had no intention of returning to the sub-prime market.

To be fair to the brokers who saw this as the second coming the reality is that anything north of 90% LTV has been treated as sub-prime in the past year. Lenders have only favoured clients with the cleanest of credit histories and this continues to be the case.

Kensington’s move to consider those who have taken a financial hit but managed to get back on their feet should be welcomed. It may only be one lender, and no doubt at relatively modest volumes too, but Kensington was first out of the blocks after the last recession in offering non-conforming products. Clearly, it can draw on that experience to inform any decisions it might make to lend to borrowers with less than spotless credit histories this time round.

But will Kensington’s move encourage other lenders to follow suit? It seems unlikely. The key problem is funding, and that’s what is holding back active, wannabe or prospective lenders. It doesn’t matter if you can see a diamond opportunity where you could price for risk and make a decent margin, without funding it is doomed to remain nothing more than an interesting idea scribbled on the back of a cigarette packet.

So well done to Kensington but it’s too soon to celebrate sub-prime rising from the dead.