A mortgage provider specialising in risky loans to habitual defaulters yesterday endorsed the prevailing wisdom that the housing market will weather an economic downturn.
Kensington, which lends to people turned away by conventional mortgage companies, said it was not seeing even the faintest upturn in repossessions and bad debts and did not expect to do so for the next 12 months at least.
The group is regarded as an indicator of the future health of the housing market, because its customer base of contract workers and loan defaulters makes it especially vulnerable to an economic downturn.
John Maltby, Kensington's chief executive, said: "Repossessions are at 1 per cent and bad debt provisions at 0.2 per cent. We don't expect that to change over the next year, but over the next 24 months it's harder to say."
He made the comments as Kensington disclosed that its new business pipeline, at £140m, was 50 per cent higher than a year ago and posted a 52 per cent rise in pre-tax profits for the half-year to 31 May, to £11.4m.
The better-than-expected performance came on the back of strong investment income, although weak volumes during the first quarter meant profits from mortgage sales fell.
The average purchase price of homes bought by Kensington's customers rose 12.5 per cent to £90,000, with about half of the loans being made to homebuyers in the South-east. Overall bad-debt provisions rose slightly.
"We're just being a little more prudent," Mr Maltby said.
Tony Cummings, an analyst at Bear Sterns, said: "If anything, new business volumes in the first half appear to be a bit lower than expected, but the outlook is rosier."
Kensington shares, floated at 225p in November, closed up 2.5p at 210p.Reuse content