05 March 2021
25 years of difference: celebrating Kensington Mortgages - blog
5 min read
Kensington Mortgages was the first-ever specialist mortgage provider. We entered the market in December 1995 with a simple belief: that people with different backgrounds and financial circumstances should be able to own a home. We wanted to help those who were penalised for failing to meet the ‘one size fits all’ approach of the high street. So, for the last 25 years, we’ve been using our expertise to develop specialist mortgages that work with people’s circumstances, not against them.
The people we were thinking of back then, often referred to as the ‘underserved’, are now more important than ever before. The increase in entrepreneurial ambition, the growth of the gig economy and the creation of new, flexible types of employment means that many more people have different sources of income and fall outside of the traditional, tick-box categories that often help secure a mortgage.
Whilst our original purpose has remained unchanged, our business has evolved significantly. Our desire to support people with more complicated financial circumstances means that we’ve had a similarly complex journey of our own: we’ve gone from private ownership to public ownership and back to private combined with merging with another business. Along the way, we’ve continuously evolved our business model to meet the changing environment.
It goes without saying that a lot happens in a quarter of a century. The market has seen huge change since 1996: average house prices have gone from around £58,000 to £230,000 and the average mortgage has gone from approximately £51,000 to £198,000. We have adapted to these changes and found new ways of meeting customer requirements. We don’t push products. Instead, we focus on genuine needs that are relevant to the people who make up today’s society: nurses, teachers, self-employed, private sector landlords, the armed forces, first-time buyers, to name a few.
I often feel that as an industry, we get lost in corporate structures and business jargon. We drown in acronyms, from BTL to LTV to SVR, and forget that we’re just talking to another person about owning their own home. It’s about so much more than bricks and mortar: it’s about hopes, dreams and futures. Yet we’re guilty of forgetting this – and getting caught up in the numbers. Competition in the mortgage market often centres around throwing the lowest price at the customer. Just take a look at the posters in the windows of your local high-street Banks and Building Societies. At Kensington Mortgages, we focus on developing products that meet real customer needs and desires rather than competing on price.
Being different comes with its challenges and we’ve spent a lot of time confronting false perceptions. Providing complex mortgage products does not mean that we’re just dealing with bad credit. The ‘complexity’ arises when requirements don’t fit into a neat category. I’ll take it back to basics for a moment: when you underwrite a mortgage, you look at income and credit position. People often think that specialist lending results from credit issues, whereas it might be a result of the income side. You may have a super credit score but receive your income from a number of different sources so that it varies every month – meaning you require something that your typical high-street mortgage provider can’t offer.
Our constant focus on providing customers with products that are relevant means that we continue innovating, to stay ahead of the competition and offer something new. To take a simple example: we know that climate change is high on lots of our customers’ agendas and yet so many of us don’t know how to combat it in our everyday lives. Some recent research caught our eye which revealed that 9.7 million UK households haven’t made any changes to the way they use energy at home in recent years, and 73% of those surveyed were surprised to hear that British homes are responsible for a quarter of the UK’s carbon emissions*. We were inspired to create the eKo Cashback Mortgage where we offer customers £1,000 for improving their home’s energy efficiency. It’s products like these that I’m so proud of, where we’re providing simple ways for people to make their homes fit for a greener future.
I’m also proud of the fact that we practice what we preach and reflect what we’re doing externally, internally too. We are the only specialist lender that has developed and published a set of ESG targets, which include everything from reducing our carbon emissions by 20% by 2025 to reducing the amount of landfill waste generated by recycling by at least 30%.
As we look ahead, there is so much to be excited about. I genuinely believe our sector is on the cusp of transformation: mortgages are one of the few areas of retail financial services that haven’t yet been disrupted. Buying a plane ticket, getting home insurance or securing a car loan has gone from taking a handful of weeks to a number of seconds over the past 25 years. But when it comes to getting a mortgage, we are seeing this trend reverse: it takes longer than ever before!
So, we’re working hard on using technology to simplify and speed things up. We’ve been building a new platform which enables quick changes to products, pricing and processes; we’re focusing on how we can gather data through open banking rather than expecting customers to submit months of bank statements. We’re also using an AI platform that allows us to better understand how loans will perform over time so we can price better.
But we’re alert to the downside of digital: namely, the danger of ‘computer says no’. The rise of automated underwriting means that when it comes to something as important as your new home, there’s effectively a robot reviewing your personal circumstances and saying ‘yes’ or ‘no’. Whilst we are firm believers in responsible lending, we don’t support an over-reliance on credit scores and algorithms to make decisions. Our team of real people have years of experience and are trained to get to know our customers beyond the tick boxes on an application form. We call this the Kensington Difference. Hopefully, more people will be able to benefit from it in the years to come.
Whilst the UK is hopefully moving in the right direction when it comes to the Covid-19 pandemic, we know its impact isn’t going away any time soon. After the last financial crisis, self-employment figures shot up as people sought out new ways to secure income and we’re anticipating a similar trend post-Covid so are gearing up to help them.
We’re here, as we were 25 years ago, ready to support the rise in people with different circumstances and drive forward a new era of mortgages that give so many people the home that they deserve.
Vicki Harris has 20 years of experience working in challenger financial services brands, working across asset management, banking and specialist lending. She is Chief Commercial Officer of Kensington Mortgages, the UK’s leading non-bank specialist mortgage lender.