UK lender takes stake in Start to offer 'high risk' loans

Specialist UK mortgage lender Kensington has entered the Irish market as a shareholder in a new business offering loans to customers that financial institutions regard as a bad risk.

London-listed Kensington has taken a 60 per cent stake in Irish business Start, which is offering mortgages to the "sub-prime" market, comprising borrowers with a poor credit history or who have difficulties that lead conventional institutions to reject them.

Kensington is the leading provider of finance in this market in the UK. It has a market capitalisation of €500 million.

Its chief executive, John Maltby, told The Irish Times yesterday that it was investing between €8 million and €10 million in its foray into the Irish market.

Start has borrowed an initial €300 million from Britain's Barclays Bank, which is one of Kensington's six wholesale providers.

The company is formally launching itself this week but has been building up the business for the past six months. It has already loaned €50 million and last month processed €84 million worth of applications.

Start sells its products through a network of more than 100 brokers. All the loans are secured against property.

According to its head of sales, Paul Murphy, the sub-prime sector in the Republic could be worth between 10-15 per cent of the total mortgage market, an estimate that values it at €2-€3 billion.

Along with Mr Murphy, Start's Irish stakeholders include managing director David Ingram, chief financial officer Niall Corish and chief operations officer Dermot Nutley. Its non-executive directors include Ivan Doherty and Bill Barrett, the former Anglo Irish Bank executive.

Mr Ingram said yesterday that the firm had identified a niche in the Irish market for a specialist sub-prime mortgage lender.

Start is offering loans to people who want to consolidate debts, people with poor credit histories and those seeking to get on the property ladder for the first time.

"We are providing mortgage products and offering solutions to first-time buyers," Mr Murphy said. "There are other categories as well, for instance those with irregular seasonal employment, or people with significant supplemental earnings, but who have a low basic income."

The company charges 5.8 per cent interest, which is about two percentage points more than the annual percentage rate charged by the traditional institutions for mortgages.

Mr Murphy pointed out that for customers consolidating debts, Start's rate means they are reducing existing interest payments from 12 per cent and 22 per cent to 5.8 per cent.