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Barclays acquisition of Kensington and specialist lending

ended 01. March 2023

Following Barclays buying Kensington Mortgages for £2.4bn today, brokers have suggested that one reason for the purchase is that specialist loans offer better margins, but is this acquisition also a sign of a major high street bank accepting that self-employed and complex incomes are increasingly the norm given the new ways we all work and the side hustles and variable incomes many people have following the pandemic? In short, is it reflective of a deeper shift in labour patterns and broader societal change - the specialist loan becoming mainstream?

5 responses from the Newspage community

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Riz Malik
Independent Financial Adviser at R3 Wealth
Cutting margins to win new business is a race to the bottom, especially when the housing market is volatile. Specialist lenders can earn the same, if not more, by handling a smaller number of cases. Clients also understand that their circumstances may force them to leave the high street, at least temporarily, and that they will have to pay a rate premium, which many of them are willing to pay. This lending sector will expand, and those who are not currently involved will want to expand their exposure.
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Paul Donoghue
CEO at Concept Financial Services
The acquisition of Kensington Mortgages by Barclays appears to be driven by various factors, such as the aim to tap into the potentially profitable market for specialist loans and to expand the bank's lending portfolio. The increasing prevalence of non-traditional income sources, resulting from the rise of the gig economy, self-employment, and the pandemic's impact on employment patterns, has created a demand for specialised loans that can accommodate these income streams. Traditional lenders have faced challenges assessing the creditworthiness of applicants with complex income situations, further increasing the need for specialised lending products. Barclays recognises the growing demand for such products and aims to cater to a wider range of borrowers with diverse income streams, reflecting a shift towards a more inclusive approach.
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Luke Thompson
Director at PAB Wealth Management
I'm not too sure if it is a sign that specialist loans will become more mainstream. However, with Barclay's financial power though I think this acquisition can only be a positive for Kensington.

With Kensington already in the Limited Company BTL space, I suspect that Barclays may want to push this area of the business further in the future and new competition in this area will only help investors. Hopefully this move will help Kensington to become ever more competitive with all types of specialist lending in the future.
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Amit Patel
Adviser at Trinity Finance
Specialist lending is the new norm, borrowers' income and credit commitments are now more complex than before and lenders need to innovate and have products that can accommodate these borrowers.
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Graham Cox
Director at Bridging Hub
Pandemic aside, the number of self-employed workers has been increasing year-on-year. Inevitably those applicants tend to have more complex income, sometimes from multiple sources.

Throw in a huge influx of people with adverse credit since the cost of living crisis struck, and it's not difficult to see why Barclays wanted to snap up Kensington and grab a bigger slice of this very profitable pie.