Halifax puts further restrictions on interest-only
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Halifax Intermediaries will now require evidence of the repayment plan for all borrowers taking out an interest-only mortgage before they proceed to offer stage.
From next Tuesday the deal will only be accepted if the evidence meets its criteria and covers the full amount requested on an interest-only basis.
Existing customers are also now required when making the application to provide a copy of evidence of a suitable repayment plan if they want to convert all or part of their mortgage from repayment to interest-only.
Once received, Halifax says this evidence will be checked against its list of acceptable repayment vehicles and the mortgage account will then be transferred to interest-only.
In April this year the lender imposed the same criteria on those applying for an interest-only mortgage in branch.
A spokeswoman for Halifax Intermediaries, says: “This move aligns Halifax Intermediaries’ interest-only policy with the approach for mainstream lending across all brands and channels within the group.
“It is important that can see that customers looking to borrow on an interest-only basis have an appropriate repayment plan in place.”
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Readers' comments (10)
Craig Taggart | 24 May 2011 5:23 pm
No problem with extra documentation being asked for.
I do have a problem with any broker using Halifax intermediaries as it is effectively bad advice, due to the fact the client can get a better rate direct.
When are Lloyds group going to admit they don't want intermediary business?
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john | 24 May 2011 5:24 pm
this is ridiculous, their "list" of what is acceptable was written by mickey mouse in the last century, does it mean that if the endowment/isa info is given to the lender, and they say it is acceptable, and it subsequently fails to meet the target, does the client have a case agaisnt the back as they said it was acceptable to repay the loan???
They have to be reasonable and accept quality cases at low ltv where the method is regular overpayments of the mortgage. Take a 100k CI mort over 25 years, say 600 CI, but 400 int only. If you do int only, then overpay the mort by 200, the term reduces to under 21 years!!! Of course the bansk dont want thsi as it shows how much they rip us off.
int only and overpay is a more secure way of mortgage repayment, where the only risk is the client not overpaying, so ifno overpayments are made in a certain period, then make them change it. Surely this is not as risky as an isa whose value could plummet by 25% in the week the mortgge is due to be paid.
If only every bank was a prudent with their corporate and commercial lending as they are with a far smaller market.
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Dave | 24 May 2011 5:28 pm
This is the FSA's fault for (falsely) discrediting interest-only.
There are dozens of very good reasons for a client taking out an interest-only mortgage, with or without a repayment plan and as long as the implications have been explained to them, consumers should be allowed to make their own decisions how to manage their affairs!
This is such a retrograde step for the industry.
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Richard | 24 May 2011 6:34 pm
I agree entirely with Dave @528pm, for example a client relocating to a new job 150 miles away where they will rent during the week, but cannot sell their current home, or wants to keep it in case the job relocation does not work. Ideal to revert to interest only now to keep costs down, with view to sell in futue or revert back to C&R especially with younger clients who have 20+ years remaining on term. If interst only is bad for main residences why is it not considered bad for BTL?
As for Craig, if you recommend from the network panel available to you how can it be bad advice. You are recommending from a "lending panel representative of the marketplace". At least you are giving advice, not providing information only to many customers who don't understand. In fact surely the converse is true to recommend "direct only" is bad advice as you have not the in depth knowledge of the products on offer. At any rate Halifax intermediary products rarely source at the top of my list so don't use them often.
In fact i guess most intermediaries were using them for interest only cases as they were the most lenient, they have realised this and have now closed the "loophole" in their criteria
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KS | 24 May 2011 9:57 pm
Craig,
I think you will also find that going direct clients dont need to prove any repayment vehicles.
Wake up FSA Interest Only is good for lots of reasons.
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Luke Atkinson | 25 May 2011 1:41 pm
What odds would you get on Santander following suit?
Watch this space, soon this will be the norm.
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Anonymous | 25 May 2011 5:07 pm
There are lots of good examples of where interest only makes sense - however you are all over-looking the obviuos in that many and I would actually probably say the majority of interest only sales have been done for the wrong reasons in recent years and aren't appropriate
Lets face it guys IO has been used by lots of brokers and customers to keep monthly payments down! How many customers who have IO loans actually recieve substantial bonuses which they can repay the mortgage from? How many of them that do WILL actaully use a bonus to pay a mortgage down? How many IO loans are there siting on lenders balance sheets that aren't actually going to get repaid at the end of the term?
If lenders don't feel they can trust brokers to sell appropriately we end up at the point of least resistance.
Choice is a valuable thing, but if the majority can't act responsibley and the lenders can't police or themseleves determine appropriateness, the outcome is perhaps inevitable
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Austin E. Colaco | 25 May 2011 8:12 pm
Repayment Vehicles. Do you still want proof of Repayment plans for Buy to Let mortgages? If so, why do you insist. BTL is an investment and most people do not wish to purchase these properties ever.
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Mr Broker from E1 | 26 May 2011 1:05 pm
@Austine E. Colaco-proof of repayment vehicle is not needed for a btl.
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Anonymous | 27 May 2011 9:09 am
same old same old, sledge hammer to crack a nut.
Why not take the sensible stance of Woolwich & Abbey. Advised on correctly there is absolutely nothing wrong with Interest Only.
Its like their stance on B2L...minimum age of 25......got a client earning £400k but not 25 till 2012, cant remo an existing B2L.......as he is too young!!!!!!!
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