Nationwide follows the crowd and restricts interest-only to 75% LTV
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The number of lenders offering interest-only mortgages at 85% LTV or above fell last week after Nation-wide became the latest to cap interest-only at 75% LTV.
Teachers and Tipton & Coseley Building Societies are still offering up to 85% LTV on an interest-only basis. Others offering high LTVs on interest-only include Aldermore and National Counties Building Society which lend up to 80% LTV.
Nationwide has capped interest-only lending at 75% LTV, from its previous limit of 85% LTV. It has also capped interest-only at 75% LTV for all residential lending through The Mortgage Works, but buy-to-let lending is unaffected.
A spokesman for Nationwide says: “The change in criteria will bring the group’s policy in line with a number of major lenders.”
Last month Halifax revealed that it was capping interest-only lending at 75% LTV, down from 85%, inclu-ding for customers looking to port their mortgage. But the lender is rumoured to be looking at removing its £500,000 cap on interest-only.
David Hollingworth, mortgage specialist at London & Country, says it is a case of lenders’ following suit rather than pressure from the Financial Services Authority.
He says: “Once one lender cuts back on interest-only others will follow. It will pose a problem for existing interest-only borrowers who may have had a repayment vehicle in place in that when they remortgage they will struggle to move from the lender’s SVR if they want to stick to interest-only.”
The FSA published its business plan for 2011/12 last month in which it stressed that it had no intention to ban interest-only mortgages.
In its business plan it says: “The FSA remains focussed on ensuring that the new regime includes a robust assessment by lenders of the affordability of the loan for the individual, both for interest-only and repayment loans. It is not the FSA’s intention to ban interest-only loans.”
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