A leading challenger bank and the world’s biggest bond fund manager are among the parties vying to carve up Kensington, the specialist mortgage lender.

Sky News has learnt that Starling Bank is bidding against Barclays and another high street lender to buy Kensington’s platform, while Pimco and M&G Investments are battling to buy the company’s mortgage assets.

Kensington specialises in home-loans to the self-employed, and was put up for sale late last year after seven years in private equity ownership.

The auction, which is likely to lead to two separate transactions, is being run by Morgan Stanley, the Wall Street bank.

In total, the two deals are expected to command a price of £1bn or more.

Kensington has been owned by Blackstone and Sixth Street – which was previously part of TPG, another private equity group – since 2014, when they took Kensington Group off the stock market.

It was once part of Investec.

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Run by Mark Arnold, a former GE Capital executive, Kensington briefly changed its name to Northview but subsequently reverted to its former identity.

It is one of the largest issuers in the residential mortgage-backed securities market, having issued £12bn of mortgages since 2015.

As well as the self-employed, it specialises in mortgage lending to the over-55s and consumers with multiple incomes.

Kensington, Blackstone, Barclays, Starling Bank, M&G and Pimco all declined to comment.

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