Brokers asked to check on buyer's repayment vehicles
The crackdown on interest only mortgages continues as lender Kensington asks brokers to check up on existing customers’ repayment vehicles. Kensington has written to a number of brokers asking them to provide evidence of customers repayment vehicles, proving that the customers are on track to pay off the full debt at the end of their mortgage term.
The lender claims that this step has been taken to help them with their future decisions on interest only lending and has asked the chosen brokers to send back documentary evidence within 14 days, proving that the customers in question have a savings plan which has been receiving regular and full payments and is on track to pay off the full mortgage once the loan matures.
This comes as other major lenders plan a shake up of the interest only market, making restrictions far tighter and making interest only mortgages more difficult to obtain for customers. The move is set to break the increasing trend of interest only customers reaching the end of their loans that are unable to pay back the full capital investment. Recent research has proved that a large number of customers are not on track to be able to pay off their loans and this means difficult times for both the customers and the lenders alike, as the customers are not able to pay the loan leaving them in debt and financial difficulty, and the lenders do not receive money back which they are owed and have already planned to receive.
Brokers have been unhappy with this move by Kensington, however, as they believe the responsibility lies with the lender, not the broker, to make sure the customer will be able to pay off the loan. They claim that if a lender runs clear and thorough checks during the lending process, they should be aware of whether a client has a suitable plan in place, and after the broker has introduced the lender to the customer their job should be over.
Where other banks have already changed their rules on interest only, Kensington insists that this is not necessarily the plan for them, and these checks are merely to see if they are on the right track with their current lending. The results of these checks will decide what happens with their interest only mortgages in the future.
Article by: Jonathan Veers, Senior Mortgage Consultant at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager.
Tel: 0844 44 88 800