Kensington Mortgages may be split up as five firms battle to buy the specialist lender valued at £1bn, according to Sky News.

It says that challenger lender Starling Bank is bidding against Barclays and another high street lender to buy Kensington’s platform, while rival investment houses Pimco and M&G Investments are fighting to buy the company’s mortgage assets.

Kensington, which specialises in loans to the self-employed and the over-55s, was put on the block last November by its US investment group owners Blackstone and Sixth Street.

An auction for the lender run by Wall Street bank Morgan Stanley is likely to lead to two separate transactions, the report says.

The combined total of the two sales is expected to hit £1bn.

Blackstone and private equity firm TPG bought Kensington for an undisclosed sum from South African bank Investec in 2014. Sixth Street was previously part of TPG.

Kensington is one of the largest issuers in the residential mortgage-backed securities, selling a £452m package of home loans to the financial markets in November.

That was the lender’s third securitisation of last year, taking the total funds it has raised to £13.4bn in 24 transactions since 2015.