Tracker mortgage

If your client wants to switch products before they are eligible to do so, they will need to remortgage to a new Kensington product in the usual way and would be liable to pay an ERC.

Yes, KSR could change in the period between submission of a mortgage application, receipt of the mortgage offer and the customer completing on the mortgage. That means that the rate the customer will pay at the start of the mortgage could differ from the rate quoted in the original illustration or in the offer letter. The rate will be calculated based on the value of KSR on the date of completion plus the fixed margin your client has agreed to pay.

For new mortgage applications the KSR rate reset takes immediate effect on our systems and documentation (normally the 10th of the month or if this falls on a weekend, the previous working day) but after completion the rate change applies to the customer’s mortgage payment from 1st of the following month.

Due to the difference in timing of BBR and KSR rate changes, KSR can temporarily be lower than BBR. Therefore, when reviewing illustrations, it is important to remember that over the life of the loan KSR will be equal to or higher than BBR. However, at the point of reset KSR will never be more than 1% above BBR.

The Kensington Standard Rate is a variable interest rate, set by us and reviewed on a quarterly basis.   The KSR is based on the Bank of England base rate (BBR) plus an adjustment of between 0% (zero) and 1% to take account of our costs in funding a mortgage loan. Our KSR will not be set lower than the BBR or higher than 1% above the BBR at the time we set the rate. 

If the Bank of England base rate is lower than 0% at the time we set the Kensington Standard Rate, we shall consider the BBR to be 0% (zero).

KSR will usually be higher than BBR but there may be times when it is temporarily lower. To find out the BBR rate click here: https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp

From 1 January 2023 to 31 March 2023 the KSR rate was 3.75%.

From 1 April 2023 to 30 June 2023 KSR rate is 4.35%.

With the current market volatility, it is difficult for us to predict how the BBR and KSR will change however, on your client’s ESIS, we will provide an illustration of what their payments could increase to in a higher rate environment.

You can use our interest rate change calculator to get an idea of how an interest rate change could affect your client’s monthly mortgage payments.

As we review KSR on a quarterly basis, it could change up to four times a year and eight times over the course of the two-year variable rate period.

Changes to the Kensington Standard Rate (KSR) could mean that the monthly mortgage payment your client pays on our 2-year variable rate Tracker may increase or decrease.

Any change to their mortgage payment will take effect from the 1st of the month following a change to the KSR. However, if their payment is going to change after the mortgage has started, we will always write to them in advance to let them know what their new payment will be.

After completion, following any adjustment to the KSR, we will write to your client at least 10 working days before their monthly mortgage payment is due to notify them of any changes to the payment amount. We also publish the new KSR rate on our customer website and intermediary product guides.

No, the variable rate Tracker mortgage is not portable. If your client decides to move home before the end of the 2-year term, they will need to apply for a new mortgage.

The 2-year variable rate Tracker mortgage has an ERC of 1% until the point at which your client is eligible to transfer to a new product.

At the end of the 2-year initial period, the loan reverts to the applicable standard reversionary rate, which will also track the Kensington Standard Rate. Your client may be able to transfer to a new Kensington variable rate Tracker if available, a fixed rate mortgage, or remortgage the property.

We will notify them and you, as their broker, of their product transfer options as soon as they become eligible. Alternatively, they can remortgage to another lender, but the ERC will stay be payable.

If the Bank of England base rate decreases, any subsequent reduction in our variable Tracker rate would not take place until the next quarterly Kensington Standard Rate change. As our Fixed interest rates are based on swap rates and do not track base rates, this means that there could be a short period when our variable Tracker rate is higher than our Fixed rates.

A new KSR change and therefore any change to your client’s monthly mortgage payments will take effect on the 1st day of the following month.

If they are eligible for a new Kensington product at the end of their mortgage term, we will notify them and you, as their broker, of their product options as soon as they become eligible for a product transfer. Alternatively, they can remortgage to another lender.

As with our fixed rate products, your client’s interest rate will reflect our standard credit risk profile.

If your client purchases a new residential or BTL property and the mortgage is with Kensington, we will waive all or some of the ERC.

If they are eligible for a variable rate Tracker mortgage and we have Tracker mortgages available at that time, it will be shown as one of the product transfer options in the customer and broker Product Transfer portals.

Yes, the initial variable rate for the 2-year Tracker mortgage will usually be cheaper than our equivalent 2-year Fixed rate mortgage. However, it is important to remember that over the course of the 2-year variable rate tracker period, the interest rate, and therefore your monthly mortgage payment, could increase as well as decrease.

If market interest rates rise, it is possible that the variable rate could rise above the Kensington 2-year Fixed rate mortgage at some point during the 2-year period. Whether the total cost over 2 years of the 2-year variable Tracker mortgage is more or less than the 2-year Fixed rate mortgage will depend on how market interest rates move.