GE Money Home Lending were an active lender in the UK mortgage market until they withdrew in 2015 and in doing so have left many homeowners as GE Money Mortgage Prisoners.
GE Money stopped lending after its parent company completed a deal to sell off the rest of its £8.6bn UK loan book to Blackstone, TPG Special Situations Partners, Kensington Mortgage Co Ltd and CarVAl Investors.
Whilst Blackstone, TPG Special Situations Partners and CarVAl Investors are not active lenders and cannot offer homeowners a remortgage option, Kensington Mortgage Co Ltd who is an active lender, is in turn contolled by Blackstone & TPG Special Situations Partners.
Is Kensington a Way Out for GE Money Mortgage Prisoners?
The answer to this question is constantly changing as whilst Kensington is an active mortgage lender it does have its own criteria and applicable rates to the mortgages it underwrites.
These criteria and applicable rates may not be suitable or available to all of the G.E. Money mortgage prisoners and it is important to note that whilst some G.E. mortgages may now be run by Kensington, Kensington Mortgages are under no obligation to offer a rate switch or a remortgage, with or without any additional borrowing to GE Money mortgage borrowers as Kensington did not originally underwrite those loans.
It is fair to say that you would expect an active lender like Kensington to assist those GE Money borrowers whom meet their criteria at the time of a new application but what about those that don’t?
The term ‘mortgage prisoner’ is quite the hot topic at the moment and is a concern to a growing number of homeowners whom are stuck on a standard variable rate (often very uncompetitive) but that their original lender is no longer active, which makes mortgage rate switching impossible and the only option being a new mortgage application.
This may not be an issue for some G.E Money mortgage prisoners whose circumstances have improved, but given that the GE Money loan book and its profile of lending included self-cert and adverse credit some of those customers will find their options in remortgaging with another lender very difficult, particularly those former self-cert and adverse credit customers on interest only loans, as there maybe little to no equity in the property to help facilitate the move to a new lender.
Warehouse Lending and Future Mortgage Prisoners
If Kensington offered G.E Money mortgage prisoners a way out, they could find themselves in the same situation further down the line as Kensington in turn sell on their mortgage books as part of its warehouse lending operations.
It should be noted however, that this is common practice amongst many specialist lenders and not unique to Kensington.
Kensington sources funds for its mortgages in tranches via warehouse lending, and as an example they recently renewed a £900m warehouse facility, with funding secured from BNP Paribas and Citibank.
In warehouse lending, a bank (in this case Kensington) handles the application and approval of a loan but obtains the funds for the loan from a warehouse lender, in this example BNP Paribas and Citibank.
The idea is that the bank [Kensington] then sells the mortgage on to another creditor in the secondary market at a later date, and it receives the funds from that sale that it then uses to pay back the warehouse lender.
According to Alex Maddox, capital markets director for Kensington Mortgages whom stated earlier this year “We’ve raised almost £13 billion of funding through warehouse lines and securitisations since Kensington Mortgages changed ownership in 2015.”.
This shows that Kensington have certainly enabled many new homeowners to get on the property ladder or enable people to transfer their mortgage to Kensignton.
However, a wider and uncertain issue in the context of the mortgage prisoners debate is that whilst the ‘specialist’ end of the UK mortgage market does give access to many borrowers whom otherwise would not get on the property ladder, what happens if their mortgage gets sold in a loan book deal further down the line and the loan is bought, not by an active lender, but a hedge fund, pension fund or other asset management company?
Only a few weeks ago as the news broke about Tesco Mortgages, Tesco Bank had refused to commit to selling its £3.7bn loan book to an active and regulated lender, despite a further plea from MPs.
The all party parliamentary group on mortgage prisoners asked Tesco bank to “commit to selling the mortgages to a fully regulated and active lender to avoid potentially creating more mortgage prisoners — those locked in their mortgage when they could get a cheaper deal elsewhere.”
The mortgage prisoner debate is likely to gain more awareness which can only be a good thing for homeowners and for them to consider the future, wider implications of financing their home ownership.
Whilst we cant see into the future when it comes to mortgage books being sold on, we can help you understand your options today so if you are a Mortgage Prisoner and want some help and advice we are a Whole of Market Broker so we can help you find the best deal for your circumstances today or offer advice on how to improve your options towards getting a better deal.
GE Money Mortgage Prisoners can also read our Can We Help Mortgage Prisoners if you want some further info.